mAY 23/Again the number of tonnes of gAnother whoppping 3.29 tonnes of gold added to the GLD and again the price dropped!/G7 meeting in Sendai Japa, will not allow Japan to devalue its yuan..this will be harmful to the markets/China devalues a small amount/Terrible PMI numbers for Japan, China , Europe and the USA as global trade contracts/Erodgan now has absolute power;Europe greets this with negation of visa free travel and that puts the migrants free flowing throughout Europe again/Russia adds another 15.6 tonnes to its official reserves this month/

Good evening Ladies and Gentlemen:

Gold:  $1,251.10 DOWN $1.30    (comex closing time)

Silver 16.41  DOWN 7 cents


In the access market 5:15 pm

Gold $1249.10

silver:  16.35



i) the May gold contract is a non active contract.  Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.68 tonnes of gold standing:

The amount standing for gold at the comex in May is simply outstanding at 6.79941 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today


At the gold comex today we had a GOOD delivery day, registering 44 notices for 4400 ounces for gold,and for silver we had 0 notices for nil oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.41 tonnes for a loss of 63 tonnes over that period


In silver, the open interest FELL by only 385 contracts DOWN to 202,242 as the price was silver was UP by a tiny 4 cents with respect to Friday’s trading..In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.013 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China)

In silver we had 0 notices served upon for nil oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 16,559 contracts down to 556,637 as the price of gold was DOWN $1.80 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.


We had  a monster deposit  in gold inventory at the GLD to the tune of 3.96 tonnes. The inventory rests at 872.52 tonnes. I have no doubt whatsoever that this was a paper addition as they could not possibly find the 3 tonnes in one day.We had a good sized deposit  in silver inventory at the SLV to the tune of 951,000 oz . Inventory rests at 336.024 million oz.


First, here is an outline of what will be discussed tonight:


1. Today, we had the open interest in silver fall by 385 contracts down to 202,242 as the price of silver was UP by 4 cents with Friday’s trading. The gold open interest FELL by 16,559 contracts as  gold was down $1.80 yesterday. Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).


2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Mark O’byrne)



i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 18.14 PTS OR 0.64%  /  Hang Sang closed DOWN 43.17 OR 0.22%. The Nikkei closed DOWN 81,85 POINTS OR 0.49% . Australia’s all ordinaires  CLOSED DOWN 0.60% Chinese yuan (ONSHORE) closed DOWN at 6.5542 .  Oil FELL to 47.81 dollars per barrel for WTI and 48.14 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5627 yuan to the dollar vs 6.5542 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.




i)The G7 meeting at Sendai Japan, have basically told Japan that it cannot intervene in the FX markets to lower the yen unless the USA gives its pre-approved endorsement.Japan has not been humiliated on its own turf.

If the USA does raise its interest rate in June or July, this will send turmoil throughout the globe, as Chinese FX leaves China, emerging markets tumble as does commodity prices. Europe and Japan will have a temporary reprieve as the EURO AND YEN  fall as the dollar rises, but this will be short-lived until another SHANGHAI ACCORD  comes into being

zero hedge)


ii)Trade with Japan collapses as exports decline for the 7th straight month and imports decline for 16 months in a row. The decline in imports is greater than the decline in exports so Japan shows an unexpected rise in Japanese trade surplus. Japanese output shrinks at the fastest pace since 2012 and signals a complete failure in Abenomics.



i)The number of strikes inside China has risen appreciably.  As such we are witnessing the hiring of individuals on a part time basis in order to avoid social unrest:

( zero hedge)


ii)Two months ago China threw a trial balloon upon which we reported.  They had a huge 31 trillion USA debt of which probably 20% was non performing/ The trial balloon was theat the POBC was going to force the banks to turn the bad debt into equity.  We thought that it would not get out of the starting game.  We were wrong:  China has quietly bailed out 220 billion in bad debt.

An accident waiting to happen as these guys will load up with more debt
( zero hedge)

iii)Soc Gen writes about the woes inside China and confirms Kyle Bass’s assessment that they will need at least a 30% devaluation.  Soc Gen puts their non performing loans at 1.2 trillion USA or 12% of GDP. They have already a DEPT to GDP of 350% and have no place to put additional debt.If China goes the rout of the 15% devaluation, the yuan to usa cross would be around 7.46 to one. A 30% devaluation would put the cross at 8.44 to one. Regardless this would send a massive deflation throughout the globe and totally bury the likes of commodities, Japan, South Korea and the emerging markets.

a must read..

(courtesy Soc Gen/zero hedge)


Devastation inside South Korea as the global economy contracts.  The huge problem here can be seen in the shipbuilding area where the yards have seen orders fall by a huge 94%

( Bloomberg)



i)Not only Japan’s PMI printed badly but also the Eurozone which saw its PMI print 529 down from 53.0 last month and well below the 53.2 expected.  It is hte hlowest in 16 months.



ii)Despite Greece’s depression, the crooks at the EU have forced hikes in VAT to 24% as well as added new taxes including lesser pensions.

Greece will go  further down the rabbit’s hole
( Mish Shedlock/Mishtalk)

iii) France hit by gas shortages as refinery workers go on strike and block all outgoing routes. There is no gas in the North West, North which includes Paris

( zero hedge)

iv)Again Deutsche bank admits that it now rigged stocks.  It stock slides again

( zero hedge)



i)Erdogan now has absolute power as he  appoints a puppet for Premier:
( zero hedge)
ii) Europe negates on visa free travel for Turkey /Erodgan is furious!
(zero hedge)



none today


The algo traders lift WTI back above 48 dollars:

( zero hedge)



Well that did not take long.  New President Temer has just suffered his first corruption scandal implicating  the party;s planning Minister Juca and an executive with Petrobras. The theory here is that this will lead to many more in the car wash scandal including Temer:

(courtesy zero hedge)


i)A good look at the trimmed down Kinross:

(courtesy James Wilson/London’s Financial Times/GATA)_

ii) Lawrie on gold/huge Russian purchase of 15.6 tonnes of gold and they are increase ing their reserves on average by this amount

(Lawrie on Gold)



i)USA manufacturing collapses to 2009 level and these bozos are going to raise rates?

( PMI/zero hedge)


ii)The clowns at the FED have no idea what they are doing!!

( zero hedge)
iii) tonight’s wrap up courtesy of Greg hunter/Bix Weir


Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 556,637 for a CONSIDERABLE LOSS of 16,559 contracts AS  THE PRICE OF GOLD WAS DOWN $1.80 with respect to FRIDAY’S TRADING.  We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses. IT SURE SEEMS THAT THE LATER HAS STOPPED. ACTUALLY WE HAVE WITNESSING A GRADUAL RISE IN AMOUNT STANDING THROUGH THE MONTH.  THE MONTH OF May saw its OI fall by only 27 contracts DOWN to 137. We had 69 notices filed ON FRIDAY so we GAINED ANOTHER 42 gold contract or an additional 4200 oz will stand for delivery.We have started the month with 5.6 tones and gained in ounces standing everyday but one which remained neutral. The next big active gold contract is June and here the OI FELL by 34,043 contracts DOWN to 232,241 as those paper players that wished to stay in the game rolled to August AND THE REST EITHER STAYED PUT FOR NOW OR LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 322,998. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 289,096 contracts. The comex is not in backwardation. We are ONE week away from first day notice for the huge June contract/May 31.2016.(6 trading sessions)

Today we had 44 notices filed for 4400 oz in gold.


And now for the wild silver comex results. Silver OI FELL by A SMALL 385 contracts from 202627 DOWN to 202242 as the price of silver was UP BY only 4 cents with FRIDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 71 contracts DOWN to 601. We had 72 notices filed yesterday so we GAINED 1 contract or an additional 5,000 oz of silver will  stand in this non-active delivery month of May. The next non active month of June saw its OI FALL by 9 contracts DOWN to 651 OI. The next big delivery month is July and here the OI FELL by 1214 contracts down to 133,922. The volume on the comex today (just comex) came in at 39,935 which is  VERY GOOD. The confirmed volume YESTERDAY (comex + globex) was VERY GOOD at 42,286. Silver is  in backwardation up to June. London is in backwardation for several months.
We had 0 notices filed for NIL oz.

MAY contract month:

INITIAL standings for MAY

May 23.
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  32,15 OZ



Deposits to the Dealer Inventory in oz 803.75 oz

25 kilobars


Deposits to the Customer Inventory, in oz    3793.700 oz

118 kilobars


No of oz served (contracts) today 44 contracts
(4400 oz)
No of oz to be served (notices) 93 CONTRACTS

9300 OZ

Total monthly oz gold served (contracts) so far this month 2093 contracts (209,300 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month  282,497.5 OZ

Today we had 0 dealer deposits


Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz


Today we had 1 customer deposit:

i) Into Manfra:  803.75 oz or 25 kilobars

Total customer deposits;   803.75 OZ


Today we had 1 customer withdrawals:

i) Out of Manfra:  32.15 oz  1 KILOBAR

total customer withdrawals: 32.15 OZ  (1 kilobars)

Today we had 0 adjustment:

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 44 contracts of which 3 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (2093) x 100 oz  or 209,300 oz , to which we  add the difference between the open interest for the front month of MAY (137 CONTRACTS) minus the number of notices served upon today (44) x 100 oz   x 100 oz per contract equals 218,600 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE 
Thus the initial standings for gold for the MAY. contract month:
No of notices served so far (2093) x 100 oz  or ounces + {OI for the front month (137) minus the number of  notices served upon today (44) x 100 oz which equals 218,600 oz standing in this non  active delivery month of MAY(6.7994 tonnes).
WE  gained 42 contracts or an additional 4200 oz will stand for delivery in this non non active month of May.  It is this continual increase in gold ounces standing that is driving our bankers crazy and the reason today for another raid on gold/silver TODAY.
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
We thus have 6.7994 tonnes of gold standing for MAY and 20.477 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
We now have partial evidence of gold settling for last months deliveries We now have 6.7994 TONNES FOR MAY + 12.3917 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 17.147 tonnes still standing against 20.477 tonnes available.
Total dealer inventor 658,361.132 tonnes or 20.477 tonnes
Total gold inventory (dealer and customer) =7,761,370.088 or 241.41 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.41 tonnes for a loss of 62 tonnes over that period. 
JPMorgan has only 22.79 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.
May is not a very good delivery month and yet 6.7994 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.
And now for silver

MAY INITIAL standings

 May 23.2016

Withdrawals from Dealers Inventory nl oz
Withdrawals from Customer Inventory  673,922.056 oz



Deposits to the Dealer Inventory nil oz


Deposits to the Customer Inventory  405,487.300 oz


No of oz served today (contracts) 0 CONTRACTS 


No of oz to be served (notices) 601 contracts

3,005,000 oz

Total monthly oz silver served (contracts) 2128 contracts (10,640,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month  8,541,520.7 oz

today we had 0 deposit into the dealer account


total dealer deposit:nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposits:


i) Into JPM: 405,487.300  oz

Total customer deposits: 405,487.300 oz.

We had 3 customer withdrawals

i) out of CNT: 29,969.550 oz

ii) Out of HSBC: 583,783.196 oz

iii) Out of Scotia; 60,169.310 oz


total customer withdrawals:  673,922.056  oz



 we had 0 adjustment

The total number of notices filed today for the MAY contract month is represented by 0 contracts for NIL oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (2128) x 5,000 oz  = 10,640000 oz to which we add the difference between the open interest for the front month of MAY (601) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the MAY contract month:  2128 (notices served so far)x 5000 oz +{601 OI for front month of MAY ) -number of notices served upon today (0)x 5000 oz  equals 13,645,000 oz of silver standing for the MAY contract month.
Total dealer silver:  30.034 million
Total number of dealer and customer silver:   154.297 million oz
The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
The reason for the raid today in both gold and silver is probably for the following 4 reasons:
1. The beginning of options expiry week
2. the stranglehold on the May front gold contract month
2. the continued drama in high silver OI
4. potential problem for the bankers in June gold.
And now the Gold inventory at the GLD
May 23./this is rather impossible: another huge deposit of 3.26 tonnes into the GLD with the price of gold down again today?/inventory rests at 872.52 tonnes
May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes.
May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition..
May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes
May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes
May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes
May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes
May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes
May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes
May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes
May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes
May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes
April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes
April 28/we gained 1.49 tonnes of gold at the GLD/Inventory rests at 804.14

May 23.:  inventory rests tonight at 872.52 tonnes


Now the SLV Inventory
May 23./we had a small withdrawal of 285,000 oz and that generally means payment of fees.
May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz
May 12/no change in silver inventory/rests tonight at 335.073 million oz/
 May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/
May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz.
May 9. no change in silver inventory/rests at 336.119 million oz.
MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz
May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz
May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz
May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz
April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580
April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz
May 23.2016: Inventory 335.739 million oz

NPV for Sprott and Central Fund of Canada

will update on this site later tonight/

1. Central Fund of Canada: traded at Negative 4.1 percent to NAV usa funds and Negative 4.0% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.7%
Percentage of fund in silver:36.9%
cash .+1.4%( May 20/2016). Cdn holiday /no data
2. Sprott silver fund (PSLV): Premium falls  to -.50%!!!! NAV (MAY 23.2016) 
3. Sprott gold fund (PHYS): premium to NAV  FALLS TO 0.73% to NAV  ( MAY 23.2016)
Note: Sprott silver trust back  into NEGATIVE territory at 0.50% /Sprott physical gold trust is back into positive territory at +0.73%/Central fund of Canada’s is still in jail.
It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to -.50%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.


And now your overnight trading in gold,MONDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne (goldcore)
Russia buys another 15.55 tones of gold!!

Buy Gold As “Extremely Low-Risk Asset” – Rogoff Advises Creditor Nations

Buy gold as it is an “extremely low-risk asset” is the advice of Professor Kenneth Rogoff to emerging market, creditor nation central banks including the People’s Bank of China (PBOC).

Rogoff believes that there is a good case to be made that emerging market central banks, such as the People’s Bank of China who have over $3.3 trillion in foreign exchange reserves, accumulate gold as this would “help the international financial system function more smoothly and benefit everyone”.

gold_Russia_AprilRussian central bank bought another  500,000 troy ounces of gold in April (ShareLynx)

Writing in Project Syndicate Rogoff notes that:

“Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns.”

Rogoff notes that creditor nation central banks have been accumulating gold already but at a snail’s pace:

“Emerging markets have remained buyers of gold, but at a snail’s pace compared to their voracious appetite for US Treasury bonds and other rich-country debt. As of March 2016, China held just over 2% of its reserves in gold, and the share for India was 5%. Russia is really the only major emerging market to increase its gold purchases significantly, in no small part due to Western sanctions, with holdings now amounting to almost 15% of reserves.”

The latest data from Russia over the weekend shows that the Russian central bank bought another 500,000 troy ounces of gold in April.

Russia and China continue to be the largest sovereign buyers of gold today and central bank demand remained robust in the first quarter of the year – central banks purchased 109 metric tonnes. This represents the 21st consecutive quarter that central banks have been net purchasers of gold as they continue to diversify their huge exchange reserves and significant US dollar exposures.

Despite the steady buying, most creditor nations still hold less than 10% of their reserves in gold compared to 60% to 100% in large debtor nations such as the US, Greece, Italy, France and others.

foreign exchange reservesSource Wikipedia 

Other emerging market creditor nation central banks with large foreign exchange reserves include Saudi Arabia, India, Brazil, Mexico, Thailand, Algeria, Iran, Turkey, Indonesia, Malaysia and United Arab Emirates (UAE).

The article by Rogoff is an important one and yet, like many recent significant developments in the gold market, it got surprisingly little mainstream media coverage.

It is another sign that gold is being re-monetised in the global financial and monetary system.

It also bodes well for gold’s outlook as the massive scale of international foreign exchange reserves means that even a small allocation into the small physical gold market by creditor nation central banks should see gold reset to much higher levels in all currencies. This may be why Professor Rogoff says  regarding gold that “there is no limit to its price.”

Rogoff is a thought leader and a leading voice of western central banks. He was the chief economist of the International Monetary Fund from 2001 to 2003 and is the Professor of Economics and Public Policy at Harvard University. See full article onProject Syndicate here

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Gold and Silver Prices and News
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Counterfeit gold and silver coins burning buyers – WCPO
Middle East, OPEC nations may be first to return to gold standard – Examiner
Doug Casey’s Four-Part Plan to Fix a Broken Economy – Casey Research

Gold Prices (LBMA AM)

23 May: USD 1,250.40, EUR 1,115.84 and GBP 860.89 per ounce
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce

Silver Prices (LBMA)
23 May: USD 16.31, EUR 14.55 and GBP 11.27 per ounce
20 May: USD 16.56, EUR 14.76 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce

Protecting_Your_Savings_in_the_Coming_Bail_In_Era_-_Copy-3.jpg Storing_Gold_in_Switzerland 7_Key_Storage_Must_Haves.png

Read Our Most Popular Guides in Recent Months

Mark O’Byrne
Executive Director



Russia has decided to increase its monthly purchase of gold from around 10 tonnes per month to 15.6 tonnes.

they must know something..

(courtesy Lawrie on gold)




Russia ups gold reserves by 500,000 ounces in April

Latest figures out of Russia’s central bank state that it has increased its gold reserves in April by 500,000 ounces (15.6 tonnes), which is exactly the same amount the bank reported as its reserve increase in March as well.  While February’s reserve increase was reported at 300,000 ounces, January’s was 700,000 ounces.  This means that the average month on month increase this year has been 500,000 ounces suggesting that the bank may be planning to increase reserves by this amount on a regular monthly basis throughout the year.  This would put a projected annual reserve increase of 6 million ounces – or around 187 tonnes.

Some see this increase in gold as reserves – as they do for China which has also increased reserves by around 46 tonnes so far this year – as an ongoing move to diversify reserves away from the U.S. dollar related bonds.  This could be because they see the dollar as likely to depreciate over time, or it could be a political move in Russia’s case in particular given that relations between it and the U.S. are somewhat strained.

A good look at the trimmed down Kinross:

(courtesy James Wilson/London’s Financial Times/GATA)_



Kinross’ Paul Rollinson and after the gold rush


By James Wilson
Financial Times, London
Monday, May 23, 2016

When Paul Rollinson took over as chief executive of Kinross Gold four years ago the end was in sight for the biggest gold boom in history — and for some of the people who were part of it.

After rising 500 per cent in a decade, the market price of the precious metal had peaked. In the rush to exploit the boom, mining investments and costs had spun out of control.

Investors in gold miners such as Kinross, which had lavished $11bn on acquisitions in six years and was already writing off part of that spending, were in revolt. Tye Burt, Mr Rollinson’s predecessor, was among a score of mining chief executives to lose their jobs.


It was “the end of a champagne era”, recalls Mr Rollinson. “Everything was going up, up, up, forever and ever — and then I got the back half of the mountain, where it has been down, down, down.

“This has been the challenge — running a business as you transition from one phase of the market into another,” he says on a visit to London. After a long trip to see investors in Asia, he is on his way to a gold mining conference in Switzerland. It is a gruelling schedule but he is looking forward to dinner that evening with one of his daughters, who works in the UK capital.

Negotiating the descent has not been easy for Mr Rollinson. In his first week in the job he halted plans for the expansion of its Tasiast mine in Mauritania, the flagship development for Kinross. The project was the centrepiece of a $7.1bn acquisition of Red Back Mining in 2010, Kinross’s largest deal.

After ensuing writedowns on Tasiast, the Canadian company was the first large gold miner to scrap its dividend: “That is one where you send the release out and want to crawl under your desk,” recalls Mr Rollinson in his laconic drawl.

Another project in Ecuador, Fruta del Norte, was sold for much less than it had cost during the boom years; and when tension flared between Russia and the west over Ukraine, Kinross, the largest foreign investor in Russian mining, faced criticism over its strategy.

Mr Rollinson also had to fight to prove that his appointment was the change that Kinross needed.

As the miner’s previous head of corporate development, and before that as an investment banker who advised the company on some deals, Mr Rollinson admits he might have seemed to investors like more of the same as they had had before. He had been involved in some of the decisions investors had criticised. Mr Burt was also previously a banker.

“On paper you might go, ‘Here’s another banker … here we go again’,” he says. “We just got our heads down.”

Four years on, his transition from banker to miner seems to suit both Mr Rollinson and Kinross. The miner’s shares have doubled in the past 12 months. In March, Mr Rollinson was at last able to unveil a definitive plan to develop Tasiast at a much lower cost.

And his stewarding of spending meant Kinross had the cash to snap up assets in the US from Barrick Gold, its larger rival, which helpfully reduced Kinross’s overall exposure to higher-risk countries.

Not least, Mr Rollinson, who looks the image of a tough miner but is softly spoken, is at last having some luck with the gold price, which has risen since the start of 2016. “It is hard to believe we would all be high-fiving when gold got back to $1,200 an ounce but we certainly are, and it seems to be holding in there pretty firmly,” he says.

Mr Rollinson has dual nationality: He was born in the UK but grew up in Canada, where his father worked in mining. He studied geology, and started his working life in Canada’s wide open spaces. “I was living in the wilderness all year round in a tent and I had some amazing experiences. It was my love of the outdoors that got me into this in the first place.”

But a key to his career may have been the finance classes he took while completing a postgraduate degree in mining engineering. On graduating he went into mining banking and a career in a succession of investment banks. He advised Kinross before Mr Burt asked him to join the miner in 2008.

“My intention was always to get back into mining … that is ultimately where my passion is,” Mr Rollinson says.

What has helped his time at Kinross, he says, is that while he came from banking he also had plenty of technical mining knowledge. As he puts it: “I can speak a few languages — geology, mining, corporate finance.” Many miners lost sight of some mining basics, such as the importance of asset quality, during the go-go years: Mr Rollinson says he has brought 70 technical staff into Kinross, adding that much of their job is to argue why projects should not be done, rather than rush them through as fast as possible.

“I call them The Terminators,” he says. “Every time you look at an opportunity — it is like an ice cube. The minute those guys get hold of it, it starts melting. It is ‘Forget it — take that out — that’s aggressive’ … those are the guys that matter.”

Stopping things has been a big feature of Kinross under Mr Rollinson. He describes the original project to expand Tasiast as like a plan for a house that was increasingly difficult to afford to build: today’s is a smaller and cheaper project. “Instead of building new, we are renovating,” Mr Rollinson says.

The original project could have hurt the company, he says. “What scared me was [that] we would get it half built in that overheated environment, over budget, and we might put ourselves in some jeopardy.” Not to put so much at risk was, he says, “a pretty important lesson for me”.

Another lesson has been experience of Kinross in Russia, bringing Mr Rollinson reluctantly into the political arena. At the height of tension with Moscow over Ukraine in 2014, Canada’s government tried to persuade business leaders, including Mr Rollinson, not to attend an economic forum in St Petersburg.

“That was tough but we had to say — we have employees, we have stakeholders, we have shareholders, we don’t want to get involved in politics, and with respect we intend to participate. And we did,” says Mr Rollinson.

Kinross has a seat on Russia’s Foreign Investment Advisory Council, alongside the likes of BP and Siemens. “We have been in Russia for more than 20 years … we are 98 per cent Russian. We are employing and training Russians,” says Mr Rollinson, while noting that Kinross’s mines, in Russia’s far east, are geographically closer to Toronto than they are to Moscow.

Reluctantly drawn into talking about Kinross’s past deals, and his role in them, Mr Rollinson says many have worked out well and points out that the most criticised, the Red Back Mining acquisition, was voted through by shareholders.

Now he prefers to look forward. Kinross last year acquired a US mine in Nevada from Barrick, the world’s largest gold producer by volume, and the gleam in Mr Rollinson’s eye suggests he believes he has got a good deal.

Together with the resolution of the saga over Tasiast’s expansion, he says Kinross now has “good momentum.”

“People are feeling good about the business. It’s been a slog, I can’t tell you it hasn’t — it’s been hard work. But people are seeing the fruits of their labour … what we have to do is keep our focus and keep working hard.”



Your early MONDAY morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight



1 Chinese yuan vs USA dollar/yuan  DOWN to 6.5542 ( DEVALUATION AGAIN BUT TINY/CHINA STILL FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED UP 18.14 OR 0.64%  / HANG SANG CLOSED DOWN 43/17 OR 0.22%

2 Nikkei closed DOWN 81.75 OR 0.49% /USA: YEN FALLS TO 109.45

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 95.36/Euro DOWN to 1.1206

3b Japan 10 year bond yield: FALLS   TO -.099%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.35

3c Nikkei now WELL BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  47.81  and Brent: 48.14

3f Gold DOWN  /Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.153%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 9.33%/: 

3j Greek 10 year bond yield FALL to  : 7.40%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1248.60/silver $16.35(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 23 in  roubles/dollar) 67.07-

3m oil into the 47 dollar handle for WTI and 48 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9907 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1097 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .153%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.821% early this morning. Thirty year rate  at 2.609% /POLICY ERROR)

5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)


Futures Fade Early Bounce, Slide In Illiquid Tape As Yen Rises, Oil Drops

following the latest month abysmal trade and PMI data out of Japan overnight (April exports crashed -10.1 %, worse than the exp. -9.8 and worse than last month’s -6.8% while imports plunged -23.3% also far worse than exp. -18.8 and March -14.9%; PMI 47.6, Exp. 48.3, last 48.2), it was supposed to be a straight up for the USDJPY, and its carry linked E-mini. However, that this did not happen, and instead the Yen jumped, sinking the USDJPY as low as 109.3 was troubling and suggests that the G7 “Sendai discord”, profiled here on Saturday, was worse than even we expected, and Japan indeed no longer has a right to devalue its currency which in turn has pressured the Yen higher.  (HARVEY:  SEE SENDI MEETING COMENTARY)

Aside from Japan, and the previously announced latest mega-M&A in the form of Bayer’s unsolicited $62 billion bid for Monsanto, the overnight session saw various European PMI prints, where despite a miss and drop in the EU Composite PMI (at 52.9, below Exp. 53.2, and last 53.0), Germany reported a modest improvement in its mfg and service PMIs which provided some optimism to the session.

That however does not explain the sharp, sudden swings in the Dax and Stoxx 600, which from opening red, then turning green, were back in the red at last check. Energy companies posted the biggest decline of the equity benchmark’s 19 industry groups as commodities tumbled. Bayer AG lost 3.2 percent after disclosing an unsolicited $62 billion all-cash offer to acquire Monsanto Co. amid investor concern that it might overpay for a deal that would create the world’s biggest supplier of farm chemicals and genetically-modified seeds.

Apple Inc. suppliers AMS AG and Dialog Semiconductor Plc rose at least 2.4 percent, leading a gauge of technology stocks, after Taiwan’s Economic Daily News reported that the iPhone maker has asked suppliers to prepare production for a new version of its smartphones. Aixtron SE jumped 16 percent after the German supplier of semiconductor equipment said it has agreed to a 670 million-euro takeover bid from a group of Chinese investors.

One recurring concern is what the Fed will do, and how this will impact the dollar. As a result, government bonds rose as investors weighed the timing of the Federal Reserve’s next increase in interest rates and the outlook for inflation.  As Bloomberg puts it, treasury 30-year yields fell for a third day. The yen rose from near this month’s low, spurred by the biggest trade surplus in six years and a U.S. rebuttal of Japan’s case for intervention to weaken the exchange rate.

Investors are moving to price in the Fed’s first increase in interest rates since December after several policy makers signaled a move is becoming more likely, with Fed Bank of Boston President Eric Rosengren telling the Financial Times at the weekend that he’s ready to back a rate increase. Investors now see a 28 percent chance of a June rate hike, while the chances of a July increase have climbed to 48 percent. Regional Fed chiefs for St. Louis, San Francisco and Philadelphia are due to speak Monday.

“There is a lot of discussion about interest rates in the U.S. and the data we will see this week is important,” Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg. “Maybe then we’ll have a better idea of what’s going on in June, July, or September.”

Maybe. Meanwhile, oil fell for a fourth day after Iran said again that it won’t countenance freezing output until its production is back at pre-sanctions levels, while iron ore tumbled on rising Chinese stockpiles and copper declined. The Stoxx Europe 600 Index fell, erasing an advance of 0.4 percent.

Futures on the S&P 500 also declined after initially jumping higher in thinly traded, illiquid tape. Best Buy Co. posts earnings today. Investors are also looking to economic data for indications of the strength of the world’s biggest economy and the trajectory of interest rates. A preliminary report due Monday is forecast to show U.S. manufacturing activity expanded to 51.0 in May, up from 50.8 a month ago.

Market Snapshot

  • S&P 500 futures down 0.2% to 2046
  • Stoxx 600 up 0.5% to 336
  • DAX down 0.8% to 9838
  • S&P GSCI Index down 0.5% to 365.3
  • MSCI Asia Pacific up 0.4% to 126
  • Nikkei 225 down 0.5% to 16655
  • Hang Seng down 0.2% to 19809
  • Shanghai Composite up 0.6% to 2844
  • S&P/ASX 200 down 0.6% to 5319
  • US 10-yr yield down 1bp to 1.83%
  • German 10Yr yield down 1bp to 0.15%
  • Italian 10Yr yield down less than 1bp to 1.47%
  • Spanish 10Yr yield down less than 1bp to 1.56%
  • Dollar Index down 0.05% to 95.29
  • WTI Crude futures down 1.1% to $47.83
  • Brent Futures down 0.9% to $48.19
  • Gold spot down 0.2% to $1,250
  • Silver spot down 1% to $16.37

Looking at regional markets, Asian stocks traded mixed despite initially beginning the week mostly higher following last Friday’s tech led-gains in US. Nikkei 225 (-0.5%) underperformed on weak data in which exports and imports fell more than expected highlighting sluggish demand. Japanese exporter sentiment was also pressured by a firmer JPY and contraction in PMI figures. ASX 200 (-0.3%) trades with losses as weakness in copper and oil weighed on sentiment, while Chinese bourses bucked the trend with the Shanghai Comp (+0.6%) & Hang Seng (-0.4%) initially mildly supported after the PBoC continued liquidity injections, coupled with comments from President Xi and Premier Li calling for several measures to support the economy. 10yr JGBs traded mildly higher as the risk-averse sentiment in Tokyo supported safe-haven demand.

China President Xi Jinping called for local authorities to prioritize supply-side reform and increase confidence in economic restructuring, while Chinese Premier Li Keqiang urged for less red tape, improved regulations and better services to support a sustained and healthy development of the economy.

Top Asian News

  • Yuan Basket at One-Month High as China Seen Curbing Volatility: Gains against peers show aim to prevent disorderly sales, OCBC says
  • Japan’s Exports Post Seventh Monthly Decline on Stronger Yen: April exports fall 10.1% y/y vs est. -9.9%
  • Goldman Manages Japan Minus-Rate Bond as Swaps Lure Global Funds: State-backed Japan co. sells its first negative-rate notes
  • 1MDB Bond Fates Diverge as Abu Dhabi Vow Trumps Najib Support: Malaysian fund talks with creditors Monday after April default
  • S.F. Holding to Backdoor List in Estimated 43.3b Yuan Deal: Co. will list through reverse merger with Maanshan Dingtai Rare Earth

The European week has kicked off in a choppy fashion, with equities initially trading in the red across Europe before pulling off their worst levels by mid-morning (Euro Stoxx 50: -0.3%). German large cap Bayer (-2.1 %) is among the worst performers on the continent, after the Co. announced their USD 62b1n bid for Monsanto, with shares lower by around 14% since reports of their interest initially surfaced. The downside in equities has been met with upside in Bunds, with the German benchmark briefly moving above 164 albeit failing to hold the level , as participants initially focussed on the slip in supply this week, with some desks are also noting a recommendation from Commerzbank to take a tactical long position in Bunds. Of note however, the EFSF have mandated banks for an upcoming dual tranche offering with books now open for their new 10 and 31yr bonds.

European Top News

  • Ryanair Profit Growth to Slow as Terror ‘Drip’ Crimps Fares: earnings growth will slow this year as a spate of terror attacks combines with lower fuel prices to prompt European airlines to cut fares
  • CF Abandons $5.4 Billion OCI Deal in Face of Tax Inversion Rules: Although both companies explored alternative structures to try and get the deal done, they failed to find an option that would work
  • Chinese Group to Buy Europe’s Aixtron for $752 Million: A group of Chinese investors agreed to buy Aixtron SE for about 670 million euros, giving the manufacturer a chance to boost sales by expanding in Asia
  • Sky, Iliad Said Among Suitors Weighing Italian Wireless Assets: Vimpelcom, CK Hutchison seeking to sell towers, spectrum. Fastweb, Tiscali also in talks with owners of Wind, 3 Italia
  • Brexit Spurs Torrent of Options Trading in Last Hedging Rush: investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
  • World’s Biggest Wealth Fund Faces Wider Ban on Coal Investments: A majority of parties in Norway’s parliament want to tighten guidelines that prevent the $850 billion fund from owning companies that base more than 30 percent of their activities or revenues on thermal coal

In FX, as anticipated, a cautious morning of trade, with the USD pushing a little higher, but after some of the recent moves seen, seems to be marginal positioning at best . Much of the focus is on Fed chair Yellen’s speech on Friday, so this will likely keep USD trade 2 way for the most part of the week, with her familiarly measured(/dovish) leaning (since the start of the year) a major risk for USD bulls. The yen appreciated 0.7 percent to 109.38 per dollar, after losing ground in each of the last three weeks as Japanese officials warned they may intervene to weaken the currency. Finance Minister Taro Aso raised the issue in a meeting with U.S. Treasury Secretary Jacob J. Lew, who said yen moves haven’t been overly volatile. The two were attending a meeting of Group of Seven finance chiefs in Japan.

Early action today has seen EUR/USD pushing lower to test bids from 1.1200 again, with moves partially driven by EUR/GBP losses which have seen Cable pushed back into the mid 1.4500’s as a result. German PMI’s were better than expected, but this was not reflected in the EU wide numbers. AUD/USD continues to struggle ahead of .7260 on the topside to keep the prospect of fresh lows alive, while USD/CAD is still consolidating above 1.3100 to see a potential move on 1.3200 on the table.

A measure of implied price swings in the pound over the next one month climbed to its highest since February as the vote that will decide the fate of Britain’s membership in the European Union draws closer. One-month implied volatility, a measure of price swings based on options, climbed 80 basis points to 11.24 percent.

In commodities, WTI and Brent looked to have based out in the session with WTI just under the USD 48.00/bbl level and Brent just above USD 48.00/bbl. West Texas Intermediate crude dropped 1.3 percent to $47.80 a barrel and Brent slid 1 percent to $48.23. The Organization of Petroleum Exporting Countries is unlikely to set a production target when the group meets June 2 as it sticks with Saudi Arabia’s strategy to squeeze out rivals, according to all but one of 27 analysts surveyed by Bloomberg. Iron ore prices fell in Asia as rising port inventories in China spurred concern that global supplies are once again topping demand. Futures on the Dalian Commodity Exchange fell 3.5 percent to 359 yuan a ton ($54.79). Steel rebar futures in Shanghai dropped 3.5 percent on Monday to 1,983 yuan a ton.

Copper fell 0.5 percent to $4,557 a ton, declining with other industrial metals following suggestions the Fed could raise interest rates as early as next month. Zinc lost 1.6 percent and nickel slid 1.7 percent. U.S. natural gas advanced after forecasts showing an increasing probability of above-normal temperatures in the northeast and Midwest, which can increase demand for electricity for cooling. Futures rose 2.6 percent to $2.116 per million British thermal units.

Gold has been trading sideways at USD 1250.83/oz firmly within a USD 15.00 trading range. Silver has just bounced off of its USD 16.33/oz support level but remains in a downtrend. Elsewhere in base metals copper and iron ore prices fell with Dalian iron ore futures slumping by 5% to its lowest since early March at the beginning of trade due to demand concerns from the world’s largest iron ore consumer, China.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European trade has been relatively choppy thus far as initial downside in equities was pared with some citing upbeat German PMI data
  • In FX markets, early action today has seen EUR/USD pushing lower to test bids from 1.1200 again
  • Looking ahead, highlights include US PMI alongside Fed’s Bullard, Williams and Harker
  • Treasuries rise during overnight trading amid drop in Japanese, European equity markets after euro-area Markit PMI showed growth in region’s private sector unexpectedly slowed in May, and Japan’s exports fell for a seventh consecutive month in April as the yen strengthened.
  • Speaking in Beijing, St. Louis Fed President Bullard said growth inconsistent with slow-rising path for policy rate; also said some data support market view, some support FOMC view
  • Belgium, Canada, France, Mexico, Spain, Switzerland and the U.K. have all sold debt maturing in 40 to 100 years since 2014, even if infrequently. Not the U.S., which in the interest of keeping sales regular has stuck to securities of three decades or less
  • Mark Carney is limbering up for another encounter with members of Parliament’s Treasury Committee on Tuesday at 10 a.m. in London after a fiery exchange with pro-Brexit lawmaker Jacob Rees-Mogg in March over the U.K.’s referendum on European Union membership
  • The U.K. government issued its starkest warning yet about the dangers of a vote to leave the EU in next month’s referendum, saying Brexit risks causing a yearlong recession, sparking a decline in the pound and costing hundreds of thousands of jobs
  • With only one month to go before the U.K. votes on whether to remain in the EU, investors are piling into contracts protecting against stock swings, paying prices not seen in more than a year for the hedges
  • Greece’s European creditors are preparing to disburse EU11b ($12.3 billion) once the nation successfully completes a review of its bailout program
  • All but 1 of 27 analysts surveyed by Bloomberg said the OPEC won’t set an output target on June 2, as it sticks with Saudi Arabia’s strategy to squeeze out rivals including U.S. shale drillers by pumping near-record volumes
  • The Swiss are discussing paying people $2,500 a month for doing nothing. The country will vote June 5 on whether the government should introduce an unconditional basic income to replace various welfare benefits
  • Sovereign 10Y yields mostly lower; Asian equities mixed, European equities lower; U.S. equity-index futures lower; WTI crude oil, precious metals fall


DB’s Jim Reid concludes the overnight wrap

a new week begins with today’s various flash PMIs from around the world the main highlight. Europe is expected to generally see a modest improvement overall as is the flash manufacturing number in US (51.0 expected vs. 50.8 last month). This number will be interesting as many of the regional numbers have been weak recently (Philly Fed and Empire Manufacturing) and the recovery in manufacturing seen in the US through Q1 seems to be stalling even with a firmer oil price.

Before we get to the data though, there’s been a few interesting snippets of newsflow to highlight over the weekend first. Over at the G7 finance leaders meeting this weekend much of the headlines are focused on what appears to be growing tension between the US and Japan concerning exchange rate policies. Indeed Japan’s Finance Minister Taro Aso hinted at growing frustration in the Japan camp about the stronger Yen and the subsequent impact that this was having on exporters. This point was seemingly made to US Treasury Secretary Jack Lew with Aso saying to reporters that he had told Lew that ‘one-sided, abrupt, and speculative moves were seen in the FX market recently, and abrupt moves in the currency market are undesirable and the stability of currencies is important’. According to Reuters Lew responded by saying that he did not consider recent moves in the Yen to be ‘disorderly’ and that ‘it’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other’.

The Yen is close to half a percent stronger this morning while Japanese equity markets are weaker (Nikkei -1.11%) to begin the week although that in part reflects the latest trade data which was released overnight. Japan’s trade surplus has risen to the highest since March 2010 after imports plummeted in April (-23.3% yoy vs. -19.2% expected, -14.9% previously) – offsetting a steeper than expected fall in exports (-10.1% yoy vs. -9.9% expected, -6.8% previously). Also released a short time ago out of Japan was the Nikkei manufacturing PMI for May which showed further deterioration in the sector after dropping 0.6pts to 47.6 and to the lowest level since December 2012. Elsewhere it’s a bit more mixed in trading this morning. The ASX (-0.24%) is also lower although the Hang Seng (+0.23%), Shanghai Comp (+0.43%) and Kospi (+0.18%) are posting modest gains. Oil markets are slightly weaker (WTI -0.54% to $48.15/bbl) following comments over the weekend out of Iran’s state oil minister suggesting that the nation will refrain from joining any potential production freeze at the June 2nd meeting with OPEC partners.

Also of note from the weekend is the latest from Greece where some important progress has been made towards unlocking the next set of emergency funds. Lawmakers yesterday approved a package of additional austerity measures including tax increases and pension cuts, as well as the formation of a new privatisation fund. The vote passed by a narrow majority of 153 lawmakers in the 300-seat parliament. Unsurprisingly there was big push-back from the rival opposition parties, with the next stage now tomorrow’s Eurogroup meeting where the finer details are set to be discussed around debt relief and the actual disbursement of funds.

Staying in Europe, today marks the one month countdown to the UK EU referendum date. As per Reuters, an opinion poll from Opinium on behalf of the Observer newspaper became the sixth poll out of the last seven to be published which has shown the ‘Remain’ campaign as coming out on top. The results from the online poll showed that 44% would vote to stay in the EU with the leave campaign at 40%. The same pollster had the split at 42% and 41% respectively at the end of last month. Indeed our UK rates strategists (Jack Di-Lizia) now note that implied probabilities from bookmakers’ odds are tilted heavily in favour of a vote to remain, with the probability of a Remain outcome now at 82% which is up 4% from the prior week. That said much of the commentary – as highlighted by Reuters – is still suggesting that there is still a difference between the outcomes of telephone polls and online polls with the former tending to show a larger lead for the ‘Remain’ campaign, while the latter tend to show a much closer race. It’s worth noting that from this Friday (27th) the pre-referendum ‘purdah’ period kicks in which restricts the ability for those connected to government to campaign for either outcome. So it’s possible some of the noise around the campaign dies down as a result.

Moving on. It’s worth noting that this morning our European equity strategists have downgraded their YE 2016 Stoxx 600 forecast from 380 to 325 (current 338). They cite the latest FOMC minutes as a reason for increasing risks with fears that we will re-enter the “doom loop” from a more hawkish Fed to a stronger dollar, lower oil prices, higher HY credit spreads and lower equity markets. On the upside, they think the Fed’s increased sensitivity to the problem of dollar strength means it will quickly abandon its tightening intentions once asset prices are falling, thus capping the downside for markets.

Quickly recapping how we closed out markets on Friday. Despite there being no obvious drivers in what was a pretty quiet day overall, risk sentiment was vastly improved with equity markets bouncing back from their post-minutes retreat. The S&P 500 finished +0.60% and in the process moved back to within less than half of a percent of where it was immediately prior to the FOMC minutes on Wednesday. The move also helped the index snap three consecutive weekly declines after closing the five-days with a +0.28% return. US credit was also stronger (CDX IG -1.5bps) while the rebound for risk assets in Europe was even greater. The Stoxx 600 closed +1.23% while Main and Crossover ended 2bps and 5bps tighter respectively.

Treasury yields continue to stall with the benchmark 10y hovering at 1.839%, while the USD rally also took a pause for breath with the Dollar index little changed on Friday. That in part also reflected a quiet day for data. The only data out across the pond was the April existing home sales numbers with sales reported as increasing at a slightly greater than expected rate last month (+1.7% mom vs. +1.3% expected). The only data of note in Europe had been the UK’s CBI Industrial Trends survey (-8 vs. -13 expected) which was suggestive of some modest improvement this month.

Meanwhile in terms of Fed expectations we ended the week with a close to 50% hike priced in for this summer. The odds of a July hike are sitting at 48% (up from 47% on Thursday) with June sitting at 28% (unchanged versus Thursday). As you’ll see shortly it’s a busy week for Fedspeak this week and it’s set to be capped off by Fed Chair Yellen on Friday evening. There was actually a bit of chatter from the weekend to note with regards to the Fed. The usually dovish Rosengren (voter), in an interview with the FT, said that while he is sensitive to how the data comes in, also noted that he ‘would say that most of the conditions that were laid out in the minutes, as of right now, seem to be on the verge of being met’. Rosengren also added that the Fed had set a ‘relatively low threshold’ for improvement in growth and that the economy was ‘making progress on getting to inflation at 2%’. Meanwhile fellow Fed official Williams (non-voter), who leans slightly hawkish, played down the US President Campaign as having an impact on the Fed’s decision for a possible change in policy.




i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP  BY 18.14 PTS OR 0.64%  /  Hang Sang closed DOWN 43.17 OR 0.22%. The Nikkei closed DOWN 81,85 POINTS OR 0.49% . Australia’s all ordinaires  CLOSED DOWN 0.60% Chinese yuan (ONSHORE) closed DOWN at 6.5542 .  Oil FELL to 47.81 dollars per barrel for WTI and 48.14 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5627 yuan to the dollar vs 6.5542 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.



The G7 meeting at Sendai Japan, have basically told Japan that it cannot intervene in the FX markets to lower the yen unless the USA gives its pre-approved endorsement.Japan has not been humiliated on its own turf.

If the USA does raise its interest rate in June or July, this will send turmoil throughout the globe, as Chinese FX leaves China, emerging markets tumble as does commodity prices. Europe and Japan will have a temporary reprieve as the EURO AND YEN  fall as the dollar rises, but this will be short-lived until another SHANGHAI ACCORD  comes into being

(courtesy zero hedge)

“The Sendai Dischord” – Japan Humiliated At G-7 Meeting In Sharp Rift Over Yen Intervention

At the end of February, shortly after Japan’s disastrous attempt to crush the Yen at the expense of a stronger dollar when the BOJ unveiled its first episode of Negative Interest Rates, only for everything to go spectacularly wrong for Kuroda, the world’s financial leaders met in Shanghai where the so-called Shanghai Accord took place when in no uncertain terms central bankers around the globe (and especially the Chinese) came down on Janet Yellen like a ton of bricks demanding that the Fed do a “dovish relent”, and stop the Fed’s monetary tightening talk, ease back on expectations of further rate hikes, and generally talk down the dollar.

This is precisely what happened (if only until this past week when the Fed has once again jawboned rate hike expectations higher).

However, while China was delighted because the weaker dollar meant less FX intervention and less capital outflows from China, Europe and especially Japan were livid: after all the offset of a weaker USD would be a stronger EUR and JPY.

And, heading into this weekend’s closely watched G-7 meeting in Japan’s Sendai, the Bank of Japan had made it quite clear it was not happy with being repeatedly singled out by the US Treasury as happened just a few weeks ago, when Jack Lew singled out Japan by putting it on a new currency watch list with a warning not to devalue its currency unilaterally and without prior approval of the international committee.

To be sure, when the meeting started…


everyone was all smiles…


… with hopes they could hammer the deflation monster to death…


… or failing that, hammer out some agreement…


… but it was not meant to be.

Unlike February when all central bankers had one simple intention, to push the value of the dollar lower, this time the key issue was whether or not Japan could intervene to devalue the Yen at the first possible opportunity. And without any support to take on the US, whose position has been to only allow preapproved (and thus greenlit by the US) central bank intervenions, Japan was left out in the cold.

To be sure, the G7 did release a joint statement, according to which the group of seven nations agreed not to target exchange rates, saying “excess volatility and disorderly movements” can have an adverse impact on economic and financial stability, however already here one could sense the tension express by Japan which explicitly said that the “summary statement does not officially represent G-7 consensus”, suggesting that now Japan is the G-7 black horse, desperate to push the Yen lower, however the US refuses.

Also, according to the statement, global uncertainties have increased, and as a result the G-7 reaffirmed existing exchange rate agreements, agreed to avoid competitive FX devaluation, adding that it is important to implement fiscal strategies flexibly. The G-7 also committed to reducing international cash transaction threshold hinting that the phasing out of cash in the Developed countries continues.

On the topic of monetary policy, the G-7 agreed it will continue to support economic activity and ensure price stability, in other words keep asset prices artificially inflated. It also said that terrorism, Brexit, refugees complicate economic environment.

But from a trading perspective, what was most important is what was left unsaid in the joint statement. It is here, where as Reuters reports, the United States issued a fresh warning to Japan against intervening in currency markets on Saturday, as the two countries’ differences over foreign exchange overshadowed a Group of 7 finance leaders’ gathering in the Asian nation.

As noted first above, Reuters also writes that “Japan and the United States are at logger-heads over currency policy with Washington saying Tokyo has no justification to intervene in the market to stem yen gains, given the currency’s moves remain “orderly”. The rift was on full show at the G7 finance leaders’ meeting in Sendai, northeastern Japan, with U.S. Treasury Secretary Jack Lew saying he did not consider current yen moves as “disorderly” after a bilateral meeting with his Japanese counterpart.”

The US Treasury secretary was adamant: in the aftermath of the NIRP fiasco, any BOJ interventions will have to be preapproved by the US: “It’s important that the G7 has an agreement not only to refrain from competitive devaluations, but to communicate so that we don’t surprise each other,” Lew told reporters on Saturday. “It’s a pretty high bar to have disorderly (currency) conditions.”

Hence, the US – and thus global – position is that only if the USDJPY is plunging by a few thousand pips in any given day does the BOJ have permission to intervene. For all other BOJ manipulation, the Federal Reserve will have to be consulted first. Translation: Kuroda (and by implication Abe) is now treated like a little child among the world’s financial elite, and he has lost the right to act independently. It also means that now the Fed believes China’s FX stability is far more important than that of Japan.

There was some obligatory spin by Japan to save face: after all it would be absolutely humiliating for the BOJ to be schooled on its own soil. Japanese Finance Minister Taro Aso said there was no “heated debate” on the yen with Lew, and that it was natural for countries to have differences in how they see exchange-rate moves. But the meeting with Lew did not stop him from issuing verbal warnings to markets against pushing up the yen too much.

“I told (Lew) that recent currency moves were one-sided and speculative,” Aso said in a news conference on Saturday, adding that the yen’s gains in the past few weeks have been disorderly.

The Japanese finmin was alone.

While Aso has publicly warned of intervention after the yen’s recent rise to 18-month highs, some economic policymakers have signaled that they are not too worried the yen will derail a fragile economic recovery.

Aso also said his G7 counterparts reaffirmed the importance of exchange-rate stability, Japan received no public endorsements from other G7 members for intervention to contain “one-sided” yen rises. “There is a consensus that monetary policy is well-adapted and there are no big discrepancies in currencies, so there is no need to intervene,” French Finance Minister Michel Sapin told reporters after the two-day G7 gathering concluded on Saturday.

Meanwhile, the biggest monetary hawk of all, Germany, made it clear that calls for aggressive, coordinated global fiscal policy just won’t happen.

G7 leaders called for a mix of monetary, fiscal and structural policies to boost demand but left it to each country to decide its own policy priorities – dashing Japan’s calls for more aggressive joint fiscal action.


Germany has shown no signs of responding to calls from Japan and the United States to boost fiscal spending.

Enter Germany’s finmin Schauble, who said that “the most important are structural reforms… there are more and more (in the G7) recognizing that structural reforms are crucial.”

The conclusion from this G-7 meeting, in as much as one is possible, is that the financial stress that was prevalent in February when global risk assets and commodities were tumbling and pressured the world’s financial leaders to hammer out an agreement, one which however is now self-defeating as the easing in financial conditions resulting from the Shanghai accord, is precisely what has caused the failure of a follow-up monetary agreement, not to mention Japan’s latest humiliation and demotion to rank below that of China, at the Sendai meeting.

Furthermore, should the Fed proceed with another rate hike in June or July as the market now seems to believe, it would mean more USD strength, more Chinese turmoiling, another sharp tightening of financial conditions, more tumbling asset prices and so on in deja vu fashion. But the good news for Japan is that at least it will have gotten its way and a weaker Yen, if only briefly, before this entire episode is repeated yet again.


Devastation inside South Korea as the global economy contracts.  The huge problem here can be seen in the shipbuilding area where the yards have seen orders fall by a huge 94%


(courtesy Bloomberg)

Global Deflation Alert: Massive Layoffs Are Looming In South Korea As Shipyard Orders Fall 94%

By Jiyeun Lee at Bloomberg

The South Korean government’s push to restructure debt-laden companies is set to cost tens of thousands of workers their jobs in an economy where social security is limited and a rigid labor market reduces the likelihood of getting rehired in a full-time position.

Many of the layoffs will be in industrial hubs along the southeast coastline, where shipyards and ports dominate the landscape. These heavy industries, which helped propel South Korea’s growth in previous decades, have seen losses amid a slowdown in global growth, overcapacity and rising competition from China. As a condition of financial support, creditor banks and the government are pushing companies to cut back on staff and sell unprofitable assets.

In Korea, losing a permanent, full-time job often means sliding toward poverty, one reason why labor unions stage strikes that at times lead to violent confrontations with employers and police. A preference for hiring and training young employees, rather than recruiting experienced hands, means that many workers who get laid off drift into day labor or low-wage, temporary contracts that lack insurance and pension benefits, according to Lee Jun Hyup, a research fellow for Hyundai Research Institute.

“The possibility of me getting a new job that offers similar income and benefits is about 1 percent,” said one of about 2,600 employees to be laid off following a previous restructure, of Ssangyong Motor in 2009. The 45-year-old worker, who asked only to be identified by the surname Kim as he tries to get rehired, initially delivered newspapers and worked construction after losing his permanent job. He’s now on a temporary contract at a retailer and taking night shifts as a driver to get by. Despite having these two jobs, his income has been halved. Being fired was “like being pushed into a desert with no water,” Kim said.

President Park Geun Hye last month underscored the need for the painful restructuring during a cabinet meeting, likening procrastination on the issue to a sick person frightened about undergoing life-saving surgery. Korean exports have fallen for more than a year and mounting levels of corporate debt are weighing down companies that need to find new growth engines.

Shipbuilding Industry

The government’s priority is on restructuring the hard-hit shipbuilding and shipping industries. Daewoo Shipbuilding & Marine Engineering Co. plans to cut about 10 percent of its workers, or about 1,300 people, from its payroll by the end of 2018. Hyundai Heavy Industries Co. said it is offering early retirement, after reducing the number of executives by 25 percent.

The number of layoffs is expected to balloon as the downsizing of major companies hits subcontractors. Ha Chang Min, an official at the subcontractors’ labor union for Hyundai Heavy, said the union expects about 10,000 workers to lose jobs this year as projects end.

About 205,000 workers were employed in Korea’s shipbuilding industry as of the end of 2014, according to the Korea Offshore & Shipbuilding Association. Hana Financial Investment Co. analyst Lee Mi Seon wrote in a report this month that 10 percent to 15 percent of workers in the industry are estimated to lose their jobs. With average monthly income in the shipbuilding industry at about 4.5 million won ($3,800) last year — relatively higher than other industries — the layoffs could lead to a downturn in consumption and weigh on the regional economy, Lee wrote.

Similar problems face China, whose companies compete with Korea in the global market. China has continued lending to keep its corporate sector growing but the expansion of credit has reached record levels. China’s efforts to curb overcapacity in some heavy industries will come at the price of jobs and may lead to labor unrest. This is a concern to China’s Communist Party leadership whose legitimacy is underpinned by steady employment, analysts say.

-1x-1 (23)

Strain is already seen in job markets at Ulsan, a key industrial city on Korea’s southeast coast. The number of unemployment benefit claims rose 18 percent in the first quarter from a year earlier, compared with a 1.3 percent increase for the whole country, data from the labor ministry show.

The government is currently reviewing designating the shipbuilding industry as a “special employment support industry,” according to Lee Hyun Ok, a director for regional and industrial employment policy at Korea’s Labor Ministry. If designated, the government will offer job training to those who are made unemployed and offer financial support to companies that keep their workers, Lee said.

The worst may be yet to come. The value of new orders at Korea’s shipbuilders fell 94 percent in the first quarter from a year earlier, and is forecast to fall 85 percent in 2016, according to Export-Import Bank of Korea. Plunging new orders suggests companies will no longer have room to hold on to employees once current ship-building projects end.

Korean unemployment benefits are a maximum of 43,416 won a day for a maximum 240 days. The exact amount depends on age, number of years the person has paid employment insurance, and final salary.

The proportion of income that is replaced by unemployment benefits in Korea was lower than the average for Organisation for Economic Co-operation and Development in all scenarios listed by the institution. The OECD analyzed various cases depending on the number of money earners and children in a family.

“It will be difficult for those laid off, as with the economy growing slowly, new jobs aren’t being created,” said Cho Seong Jae, director for industrial relations research at Korea Labor Institute. Also, people aren’t aware of the magnitude of the upcoming joblessness because most workers are contract-based and not well represented by unions, he said. “The government should think beyond traditional job support measures to support them,” he said.

Source: Mass Layoffs Are Looming in South Korea – Bloomberg


The number of strikes inside China has risen appreciably.  As such we are witnessing the hiring of individuals on a part time basis in order to avoid social unrest:

(courtesy zero hedge)

Chinese Part-Time Workers Soar As Economy Deteriorates

Not only is China facing a significant risk of an economic hard landing, but, as we have noted on many occasions, the country is also facing what perhaps may be an even greater risk: social unrest.


As the economy continues to weaken, and layoffs continue to mount, China has started to relax its own labor rules in order to try and keep everyone happy… for now; as China is experiencing a surge in part-time workers. In order to control costs, but still meet whatever demand comes, Reuters reports factories are now hiring by the day instead of keeping workers around in a full employment contract. In turn, workers are happy with the arrangement of course, because at least it provides the opportunity to make a day’s wage, knowing that if they are hired for that day it means there is work, and they’ll get paid for their efforts.

Squeezed by high costs and unpredictable demand, some factories in southern China’s manufacturing heartland are turning to a new strategy to survive: hiring workers by the day.


It is a far cry from Beijing’s vision of a slick, hi-tech manufacturing future of computers and chip makers: on a warm morning in the southern town of Shiling, dozens of workers gather on a city street to haggle for a day of work making bags for $20 to $30.


Factory owners in this leatherworking town, and in those nearby, say just-in-time labor allows them to stay competitive, even if day wages can be higher, individually, than full-time salaries.


Workers, operating in a legal grey area, say they tolerate the conditions because many fear factories offering permanent jobs could fail to pay if clients dry up and the manager runs off.


“We never used to hire temporary workers, because labor costs were not very high. Our workers were on staff,” said Huang Biliang, who runs a button factory in the southern city of Dongguan. “But recently we’ve started to hire more temporary labor.”


In a stainless steel factory in the nearby town of Jiangmen, David Liang, manager of Chiefy, agrees: “Every additional (permanent) worker I hire is an additional risk.”


The cost of social unrest is well known to the government, and if allowing slightly different rules of employment means that the masses will be happy, then its something officials are willing to tolerate. Although, at the end of the day, officials may have no choice but to soften their stance. As He Fan, chief economist of Caixin Insight Group points out, the manufacturing sector is shrinking, and casual workers may already be on track to outnumber permanent workers as it is.

Though China has tightened rules, officials have also expressed concerns about them. In March, Finance Minister Lou Jiwei publicly criticized the labor contract law, which requires companies to provide employees a written contract.


The same month, Guangdong province – which has raised its minimum wage at regular intervals in recent years – said it would scrap scheduled rises to the local minimum wage in 2016, and keep it at 2015 levels through 2018.


“The total employment of the manufacturing sector is shrinking,” said He Fan, chief economist of Caixin Insight Group, but not the informal portion of that. He sees the shift to more casual labor as also partly led by younger workers.


“If my assumption is correct, then the casual workers may outgrow the permanent workers.”


Needing to maintain employment, local authorities appear to tolerate the arrangement.

For now, workers like 39 year old Wang Binge, are happy with the part-time arrangement while looking for more stable work.

In Shiling, in China’s bag capital, men and women gather in the early morning looking for a day’s work.


Factory managers in vans and on scooters each hold a sample of the bag they produce; workers crowd around them, examining the sample and discussing the per-piece wage.


Among the workers is 39 year-old Wang Binge, who until three years ago ran her own small handbag workshop nearby. The workshop was once profitable enough to allow her to buy a Toyota and build a house in her hometown in southern Hunan province.


But orders dried up, and now Wang looks for jobs that pay at least 180 yuan ($27) for about a 12 hour day.


So many factory owners have fled without paying their staff, Wang and other workers said, that they feel safer being paid cash by the day, while hoping for more stable work.

At the end of the day, if workers are even tentatively happy, it improves the chances that the government won’t have to deal with further unrest. For China officials, that’s all that matters at the moment.


Two months ago China threw a trial balloon upon which we reported.  They had a huge 31 trillion USA debt of which probably 20% was non performing/ The trial balloon was theat the POBC was going to force the banks to turn the bad debt into equity.  We thought that it would not get out of the starting game.  We were wrong:  China has quietly bailed out 220 billion in bad debt.
an accident waiting to happen as these guys will load up with more debt
(courtesy zero hedge)

China Has Quietly Bailed Out Over $220 Billion In Bad Debt In The Past 2 Months

Two months ago we were amazed to read that according to the latest “deus ex machina” proposed by the PBOC, China would “sweep away” trillions in bad loans by equitizing them in the form of debt-for-equity exchanges. This is how we tried to explain this unprecedented move on March 10 when Reuters first hinted it was coming:

This proposal entails nothing short of a nationalization on a grand scale, one which gives China’s impaired commercial banks – all of which are implicitly state controlled – the “equity keys” to the companies to which they have given secured loans, loans which are no longer performing because the underlying assets are clearly impaired, and where the cash flow generated can’t even cover the interest payments.


In effect, the PBOC is proposing the biggest debt-for-equity swap ever seen. What it also means is that since the secured lender, which is at the top of the capital structure will drop all the way down, it wipes out the existing equity and unsecured debt, and make the banks the new equity owners, and as such China’s commercial banks will no longer be entitled to interest payments or security collateral on their now-equity investment. Finally, while this move does free up loss reserves, it essentially strips banks of their security and asset protection which they enjoyed as secured lenders.


So why is China doing this? By equitizing trillions in bad loans, it frees up the corporate balance sheets to layer on fresh trillions in bad debt, the same debt that pushed these zombie companies into insolvency to begin with.


What this grand equitization does not do, is make the underlying business any more profitable or viable: after all the loans are bad because the companies no longer can generate even the required cash interest payment – as a result of China’s unprecedented excess capacity and low commodity prices which prevent corporate viability. It has little to do with their current balance sheet.


That, however, is irrelevant to the PBOC which is hoping that by taking this step it can magically eliminate trilliions in NPL from commercial bank balance sheets in what is not only the biggest equitization in history, but also the biggest diversion since David Copperfield made the statue of liberty disappear, as instead of keeping the bad loans on the asset side as NPLs, thus assuring at least some recoveries, the banks are crammed down and when the next NPL wave hits, their exposure will be fully wiped out as mere equity stakeholders.

So why are banks agreeing to this? Because they know that as quasi (and not so quasi) state-owned enterprises, China’s commercial banks are wards of the state and when the ultimate impairment wave hits and banks have to write down trillions in “equity investments”, Beijiing will promptly bail them out. Essentially, in one simple move, Beijing is about to “guarantee” trillions in insolvent Chinese debt.


In short, what the PBOC has proposed is the biggest “shadow nationalization” in history, one which will convert trillions in bad loans in insolvent enterprises into trillions in equity investments in the same enterprises, however without any new money actually coming in! Which means it will be up to new credit investors to prop up these failing businesses for a few more quarters before the reorganized equity also has to be wiped out.

We concluded as follows: “While this is surely “good” news for the very short run, as it allows the worst of the worst in China’s insolvent corporate sector to issue even more debt, in the longer run it means that China’s total debt to GDP, which is already at 350% is about to surpass Japan’s gargantuan 400% within a year if not sooner.”

It also means much more deflation, because Chinese corporations which were adding to China’s massive excess capacity bubble and which would have otherwise gone out of business, will remains in business as they no longer have to worry about funding interest (after being effectively nationalized by the state), and instead will pump output at historical levels.

* * *

To be sure, we did not think much more of this proposed grand nationalization in the past two months, because virtually everyone had spoken up against it: from pundits to analysts, even the media figured out what a naive plan this was.

And then today we learned that not only was China going through with this epic debt-for-equity swap, but it has already equitized over $220 billion in non-performing loans.

Note: these are not traditional, Chapter 11 prepacks where the debt is converted into equity and the debt holder gets the keys to the company. In this case, it is the Chinese government itself which indirectly via state-owned banks, has become the de facto owner of countless companies.

As the FT reports:

“Beijing has stepped up its battle against bad debt in China’s banking system, with a state-led debt-for-equity scheme surging in value by about $100bn in the past two months alone. The government-led programme, which forces banks to write off bad debt in exchange for equity in ailing companies, soared in value to hit more than $220bn by the end of April, up from about $120bn at the start of March, according to data from Wind Information.”

As we said two months ago, and as the FT now confirms, this is nothing short of a state-led bailout of virtually every troubled, overindebted industry.

The latest figures for the debt-to-equity swap, and a debt-to-bonds swap initiated last year, show a subtle bailout is already under way. “One can argue the government-led recapitalisation is already happening in an atypical way and thus reducing the need for recapitalisation in its written sense,” said Liao Qiang, director of financial institutions at S&P Global Ratings in Beijing.

Sorry Liao, but ever since the Global Financial Crisis, recapitalization in the “written sense” has meant a direct or indirect taxpayer funded bailout of the most insolvent sector. And that is precisely what China is doing.

To be sure, Beijing’s debt-to-equity strategy should be differentiated from the debt-to-bonds plan unveiled last year: under the latter program, up to Rmb4tn ($612bn) had been approved in 2015 for the debt-to-bonds swap, which has seen state-controlled banks trade short-term loans to companies connected to local governments in exchange for bonds with much longer maturities. The program relieved the pressure on local governments were that were forced to take out bank loans to proceed with public works projects in the absence of municipal bond markets.

However, the debt-to-equity project has received far less enthusiasm from analysts, who saythat coercing banks to become stakeholders in companies that could not pay back loans will further weigh down profits this year. Instead of underpinning stability at banks, Mr Liao says the efforts undermine it.

The programmes are just two fronts in Beijing’s battle against bad debt.  A third one was revealed recently when China started repackaging its massive NPLs in the form securitizations. As the FT writes, “the government is also reopening the market for securitising bad debt with two deals worth Rmb534m due this month. The efforts have even gone online, with debt managers hawking off bad loans on China’s biggest online retail site.”

The good news for China is that by swapping one bad asset into another, it may have confused the market long enough to buy a few quarters of time.

The bad news is that, as we first reported last November citing Fitch calculations, China’s bad debt “neutron bomb” is roughly 20% of total bank loans. Last week, CLSA’s Frarncis Cheung came up with his own calculation of China’s NPL program which he see as anywhere between 15% and 19%. Here is his analysis:

As analysts are now competing to come up with estimates of the real level of stressed loans in the China banking system and related shadow finance cycles, a good starting point can be found in the IMF’s latest Global Financial Stability Report published in April. This, based on a  sample of 2,871 listed and unlisted nonfinancial Chinese companies, calculates that 15.5% of total commercial bank loans to the corporate sector are “potentially at risk”. This debt-at-risk ratio is defined as having an interest coverage ratio (EBITDA dividend by interest expenses) of below one. Assuming a 60% loss ratio, the IMF puts potential bank losses at 7% of GDP, a level which it still considers as “manageable” while noting that for this to remain the case “prompt action” to address excess capacity and the like needs to occur.

All this is perfectly reasonable. Still Francis Cheung makes the valid point in his report that the IMF has relaxed its criteria from when a similar exercise was done in 2014.Then the debt-atrisk estimate was done using an interest coverage ratio of less than 2x. Now it is 1x. If the same 2x threshold was employed in 2015 the debt-at-risk estimate would rise to 28% of total corporate loans. Meanwhile, Cheung estimates, using the latest listed A-share company data for 2015, China’s bad-debt ratio or NPL ratio at 15-19% based on companies’ interest coverage and debt sustainability.

In short, whether China’s NPL are 15%, 19% or even 28% of total debt, these are absolutely gargantuan amounts – recall that China will report roughly $35 trillion in bank assets this quarter.


To believe that any government, even that of China, will be able to cover up what is indeed the “neutron bomb” (as we first dubbed it) under the entire Chinese financial system with some rhetorical sleight of hand, and shifting non-performing assets from one bucket into another without actually addressing the underlying issue, namely collapsing of cash flow, is the height of stupidity and arrogance. Which probably explains why so many sellside banks see this as a viable plan.




Soc Gen writes about the woes inside China and confirms Kyle Bass’s assessment that they will need at least a 30% devaluation.  Soc Gen puts their non performing loans at 1.2 trillion USA or 12% of GDP. They have already a DEPT to GDP of 350% and have no place to put additional debt.If China goes the rout of the 15% devaluation, the yuan to usa cross would be around 7.46 to one. A 30% devaluation would put the cross at 8.44 to one. Regardless this would send a massive deflation throughout the globe and totally bury the likes of commodities, Japan, South Korea and the emerging markets.

a must read..

(courtesy Soc Gen/zero hedge)


Kyle Bass Was Right: SocGen Does The Math On China’s Staggering NPL Problem, Issues Dire Warning

Yesterday, when reporting on the latest development in China’s ongoing under-the-table stealthnationalization-cum-bailout of insolvent enterprises courtesy of a proposed plan to convert bad debt into equity, we noted that while China has already managed to convert over $220 billion of Non-performing loans into equity, concerns – both ours and others’ – remained. As Liao Qiang, director of financial institutions at S&P Global Ratings in Beijing, said coercing banks to become stakeholders in companies that could not pay back loans will further weigh down profits this year. Instead of underpinning stability at banks, the efforts undermine it.

That said, while many have voiced their pessimism about China’s latest attempt to sweep trillions in NPLs under the rug, there had been no comprehensive analysis of just how big the impact on China’s banks, economy or financial system would be as a result of this latest Chinese strategy.

Until now.

In a must read note released by SocGen’s Wei Yao titled “Restructuring China Inc.” the French bank tackles just this topic (and many others). What it finds is disturbing and serves as a confirmation of all recent bearish assessments – most notably that of Kyle Bass – that China’s bad debt problem will end in tears.

Here is Yao’s summary:

China is still leveraging up rapidly, with its nonfinancial debt up to 250% of GDP [ZH: realistically 350%]. The corporate sector and capital market liberalisation that the authorities are pushing for has begun to destabilise the debt dynamics. The beginning of debt  restructuring for SOEs, the biggest borrowers and underperformers, brings closer the prospect of bank restructuring – a scenario we think that has a probability of more than 50% over the medium term.


As SOE restructuring progresses, it will also become more apparent that Chinese banks need to be rescued.


We estimate that the total losses in the banking sector could reach CNY8 trillion, equivalent to more than 60% of commercial banks’ capital, 50% of fiscal revenues and 12% of GDP. The actual tally may still be years away, but could be more sizeable if problems continue to grow.


China may still be able to dodge an economic crisis while restructuring its corporate and banking system, but the margin for error will be uncomfortably slim.

To repeat SocGen’s shocking conclusion, SocGen estimates that the total losses of banks could reach CNY8tn (or over $1.2 trillion), equivalent to more than 60% of their capital. It is also equivalent to 50% of fiscal revenues and 12% of China’s total GDP!

Before we get into the details, SocGen reminds us how China’s conducted its previous debt-for-equity round back in 1999, and what happened then:

The previous round of bank restructuring started in 1999, after the liberalisation of the corporate sector was well on track. The programme was wrapped up after the Agricultural Bank of China was successfully listed in 2010.


The explicit cost was close to CNY5.4tn (= total NPLs disposed + capital injection, table below), equivalent to 25% of average annual GDP during that period. The government – or essentially taxpayers – footed about 80% of the bill, while new investors – mostly FDI and IPO proceeds – financed more than 15%, and losses on banks accounted for less than 3%. For the government component, the MoF offered 40%, the PBoC 35% and AMCs (100% owned by the government) the remainder.



There was also a less obvious – though not any less real – cost inflicted on the private sector. Financial repression, in the form of interest rate controls, forced households to accept low deposit rates, while guaranteed interest rate margins (minimum 300bp throughout the 2000s). Although SOEs, thanks to implicit state guarantees, enjoyed lower borrowing rates from banks than what they should have be charged based on their performance, the interest rate margin made it easy enough for banks to make decent profits. As a result, banks had few incentives to service private corporates, which were pushed to shadow banks for exorbitantly expensive borrowing costs. In addition, banks were also offered tax exemptions and other forms of fiscal subsidies.


However, the impressive growth, owing to economic liberalisation and the strength of the global economy, was the biggest debt-shrinking tool. The bold SOE reform in the 1990s dissolved the lion’s share of SOEs, opening a vast space for the private sector to grow. The market liberalisation that commenced in 1978 eventually paved the way for China’s WTO entry in 2002, which gave the economy another big boost.

That was then, what about now?

In one previous section, we noted that 12% of listed SOEs’ debt is at risk. Our equity strategists deemed 10% as a baseline estimate for the NPL ratio at listed banks, based on an analysis of financial data of all the listed companies’ – both SOEs and private. Looking at the bigger picture, we have reasons to believe that the share of non-performing assets in the entire banking system or non-performing debt within the entire corporate sector should be higher – at 15% or more. (Again, note that we previously estimated the nonperforming debt ratio of SOEs at 18%.)


Big banks, which account for less than 50% of the banking sector, are better run and more prudent than small banks; and listed companies, which account for 10% of total corporate sector debt, should be more efficient than non-listed ones. Furthermore, since banks have engaged in off-balance-sheet lending for years and in many forms, some of the credit risk there may well remain with them because of reputational risk.


Applying a 15% non-performing ratio on banks’ total claims on nonfinancial corporates and total debt of nonfinancial corporates gives us CNY12tn and CNY18.5tn, respectively. In order to capture banks’ contingent risk currently hidden in the shadow banking system, we take the mid-point of CNY15tn – $2.3tn, 22% of 2015 GDP and 7.5% of banks’ total assets – as the basis for the likely aggregate non-performing assets that the banking sector may suffer.


According to the Doing Business Survey, the average recovery rate in China is about 35% at present. However, once NPL recognition picks up the pace, this rate could be compressed. Assuming the recovery rate drops to 30%, the potential losses on the CNY15tn nonperforming assets would be CNY10.5tn. Regardless, the first line of defence should be banks’ loan-loss reserves, which stood at CNY2.3tn at end-2015. That leaves about CNY8tn in losses (equivalent to over 60% of commercial banks’ total capital, and close to 50% of annual fiscal revenues and 12% of GDP).

In short, according to SocGen an unprecedented 12% of China’s GDP at risk of loss (and perhaps well more than this based on the bank’s conservative NPL assumptions). So how will China fund these losses? This is where it gets tricky, and why devaluation is looking like an inevitable outcome.

As SocGen writes next, when it says to “beware of devaluation risk”, one possible source of funding is backed by government bonds, which is effectively a form of QE, and which, as a result of China’s impossible trinity would have an impact on capital flows and the yuan that would be “rather negative.

Last time, AMCs issued CNY846bn of bonds to pay for NPL purchases, which was more than three times the amount of CGBs issued by the MoF for that restructuring. We think CGBs should play a much bigger role in the next round. A bank restructuring with explicit sovereign support is the most transparent form, which can help clarify the state’s boundaries going forward and avoid revisiting the question about implicit government guarantees.


There is also one technical consideration on the bond market. Last time, the MoF did not issue government bonds for most of the bailout funds it provided, but rather used a much less transparent structure of “MoF receivables” vis-à-vis each bank. At present, CGBs account for only 15% of GDP, which is not deep enough for the long-term development of China’s domestic bond market.


In either case (fundraising by the MoF or quasi-government agencies), increased bond supply could overwhelm the market. The PBoC might have to expand its balance sheet to either purchase CGBs directly (i.e. quantitative easing) or provide liquidity for big financial institutions to absorb the bond supply, so as to keep domestic interest rates from rising too much. However, given the impossible trinity – unless the authorities decide to seal off the capital account – the impact on capital flows and the yuan would then be rather negative.


This was not an issue last time due to strong economic growth, a rapidly expanding current account surplus and, most important of all, a completely closed capital account. However, none of these could be feasibly repeated to the same degree.


Let us go back to the CNY8tn estimate for capital losses. The government would need to raise CNY2-6tn if it wanted to fund 25-75% of the recapitalisation on top of the losses already incurred on its equity holding. If all in the form of CGB issuance, then the new CGB supply would be equivalent to 3-9% of GDP, 12-35% of fiscal revenues and 20-60% of outstanding CGBs. In addition to bank recapitalisation, the government would have to provide fiscal support to address unemployment pain and other social effects. The total fiscal bill would probably be considerably more than 10% of GDP.


After such expansion, CGBs would still account for only 18-25% of GDP, while the total government debt would rise anywhere between 50% and 75%, depending on how much more LGFV debt would be converted into LGBs. Our rate strategist thinks that it would be rather difficult for the bond market to cope with the high end of the estimates of additional CGB supply without help from the PBoC.

Another option is for the PBOC to use its vast (if declining) reserve holdings to directly inject funds into the banking system. This approach is less likely.

The CNY8tn in losses is equivalent to $1.2tn at today’s exchange rate. The same ratio as last time means $480bn FXRs of the $3.2tn stock for recapitalising banks – not implausible technically. If another FXR injection were to take place, banks might be under greater pressure to convert and put at least part of the new capital to use as soon as possible. Any conversion would exert appreciation pressure on the Chinese currency versus the dollar (i.e. deflationary).Even if banks were to use derivatives to raise local currency without conversion (for example, repo contracts), these activities would still impact the currency market.


Then, the PBoC would need to make another difficult decision – whether or not to buy these dollars back for a second time. Technically, the PBoC could choose to do so, and that would mean heavy intervention in the FX market, reversing all the reforms aimed at currency flexibility and – possibly – capital account liberalisation.

In summary China has two options how to address its upcoming CNY8(+) trillion in bank losses:

  • Using government bonds to recapitalise banks would lead to either higher domestic interest rates or higher currency devaluation risk, if the PBoC helps absorb the bond supply.
  • Using FX reserves would result in high appreciation pressure on the currency after the injection in the short term, but the PBoC’s ability to prevent renminbi depreciation in the future would be weakened.

And here is why, as per SocGen’s conclusion, Kyle Bass will be ultimately right and why China will almost certainly be forced to devalue its currency:

The solution to the currency issue might be a mix of two: basically, banks selling the PBoC’s dollars (obtained from FXR injection) to dampen the depreciation pressure on the renminbi caused by the expansion of the PBoC’s balance sheet, which is a result of the PBoC’s acquisition of CGBs issued for bank recapitalisation.However, it is impossible to make the mix just right so that there is no or little impact on the currency – this would require an unrealistically high degree of PBoC control over banks and/or an incredible amount of foresight.


The bottom line is that the government bail-out programme could be designed in a way to greatly limit its impacts on currency and capital account stability. Such designs seem to exist in theory, but would be very difficult to realise in the real world. We think that greater currency flexibility would probably be another major consequence that the authorities need to accept alongside bank restructuring.

At this point, since the math does not lie only Chinese statistics do, the only question is how will China engage the wholesale restructuring of its banking system: fast or slow.

A fast restructuring of corporates and banks risks an economic hard landing, since that could entail massive corporate defaults and big losses in terms of economic output, even in the case of a quick recapitalisation. A hard landing threatens social stability, and for this obvious reason, Chinese policymakers have opted for a slow and gradual process.

As a result, a fast restructuring, while ultimately preferable as it will allow China to peel the bandaid off, suffer acute pain for short period of time, then resume growth, is unlikely. This only leaves a slow restructuring as the option:

Being slow and gradual means that policymakers will most likely continue to adjust the pace of defaults and restructuring by offering (targeted) credit stimulus from time to time and, if needed, topping up financial support for failing SOEs and/or banks. This approach would also force relatively stronger banks to pay for incremental NPL disposals with their profits, which is essentially asking banks’ existing shareholders to bear some of the further cost of debt restructuring.

This is precisely what China’s recently introduced debt-for-equity restructuring program is facilitating.

The government seems to think that it can restructure the worst part of the corporate sector – zombie SOEs – bit by bit and use the freed-up resources to support good corporates and the new economy. The strength seen there, alongside help from modest fiscal expansion, could offset most of the negative impacts of the debt restructuring – including unemployment pains.


However, this is an overly optimistic view. There are two major risks with this gradual approach, in our view: a lost decade and policy uncertainty.


The restructuring might be too slow – even slower than the formation of new NPLs. In this case, we would never see deleveraging, and the restructuring bill would only grow – which has been the case in previous years.

This is bad as it implies China builds up bad debt faster than it eliminates it, which with $35 trillion in bank “assets” is to be expected: recall that Chinese banks are now adding roughly $3 trillion in assets every year, a staggering pace.

Here, SocGen once again channels Kyle Bass:

It is difficult, if not impossible, for us to picture a debt restructuring scenario that does not impact industrial output. The service sector might make such an outcome possible for the whole economy, but a high degree of policy precision and coordination is required nonetheless.

But the biggest problem for China is not whether it picks the fast or slow restructuring pathway, but how it decides to pick anything in the first place.

The government appears to still be in the process of working out how to restructure. This is the root of the uneasiness – the excruciating time spent waiting before the government takes action. In the face of negative market events, the state’s gradualism may be interpreted by everyone else as policy uncertainty.


A case in point – although most people (if asked on a good day) still believe that the Chinese government will eventually come to the rescue, this view was widely questioned and did not help avoid bond market jitters when SOE defaults occurred during the past month. Not to mention the fact that this view has not been very helpful in dispelling the doubts of investors about the asset qualities of listed banks.

SocGen’s conclusion is virtually identical to that of Kyle Bass, if not even more dire, although for the sake of the bank’s access to China, it clearly needs to tone down its assessment, to wit:

Given the immense challenges and risks inherent in the debt restructuring, it is unrealistic to expect a perfectly smooth process. Even if Chinese policymakers can come up with a sensible strategy and start implementing it tomorrow, the chance of policy errors – small or large – during the process would still be quite high. This is why we assign a 30% probability to a hard landing scenario over the medium term.

And, as Kyle Bass would note, even a 30% hard landing probability is enough to lead to a 15% or greater devaluation in the Yuan. The question is not if – the math confirms it – the question is when.

Finally, we would add that with China currently nursing a realistic 350% in debt/GDP according to Rabobank, the probability of a hard landing with no incremental debt capacity left unlike the last time China restructured its banks, is just shy of 100%.

Much more in the full “must read” SocGen note.





Not only Japan’s PMI printed badly but also the Eurozone which saw its PMI print 529 down from 53.0 last month and well below the 53.2 expected.  It is hte hlowest in 16 months.


Eurozone Business Growth “Unexpectedly” Slows Down To 16 Month Low

It wasn’t just Japan’s PMI which overnight printed at a disappointing 47.6, missing expectations and signaling the sharpest decline in operating conditions since December 2012. Overnight Markit showed that the Chinese credit-induced global slowdown is coming far faster than most (if not Morgan Stanley) expected, when the Eurozone flash PMI printed at 52.9, down from 53.0 in April, below the 53.2 expected, and the lowest in 16 months. As Reuters put it, this offers “the latest evidence that a strong acceleration in growth in the first three months of the year was only temporary” and likely

Curiously this happened on the back of stronger than expected PMIs from France and Germany which as Goldman notes, suggests weaker prints in Italy and Spain which are yet to be published.

Goldman’s full breakdown of the Markit report:

  1. The breakdown revealed a 0.2pt fall in the manufacturing output component drove the decline in the composite figure. The services PMI component was unchanged at 53.1.
  2. The Euro area manufacturing PMI fell by 0.2pt in May. The manufacturing breakdown showed a 0.2pt fall in manufacturing output, a 0.2pt fall in employment, and a 0.1pt fall in new orders. Within the services PMI, the forward-looking subcomponents (which are not part of the headline services PMI figure) were particularly weak, with ‘incoming new business’ falling 1.0pt, and business expectations decreasing by 2.8pt.
  3. On a country basis, the German composite PMI was strong, rising 1.1pt, while the French composite figure rose by 0.9pt. The strength in Germany and France combined with a relatively unchanged area-wide figure suggests weaker prints in Italy and Spain, which are due to be released next week.
  4. Based on historical correlations, a composite PMI of 52.9 is consistent with growth of in the Euro area of +0.3%qoq, just below our judgemental forecast of +0.4%qoq for Q2. That said, the PMIs throughout Q1 were consistent with GDP growth of around +0.3%qoq, yet growth accelerated to +0.5%qoq (initially estimated at +0.6%qoq) on Eurostat’s estimates, and as such we remain wary of drawing conclusions too early in Q2 based on the PMI data alone.



As Reuters adds, while essentially stable – and still indicating growth – the reading was the lowest since the start of 2015. It ran against expectations in a Reuters poll, which had predicted a tick up to 53.2 in one of the earliest reported broad indicators of growth during the month.

Markit said the PMI pointed to quarterly GDP growth of 0.3 percent, in line with forecasts in a Reuters survey published earlier this month, but short of 0.5 percent in the first quarter, which was initially reported as 0.6 percent.

The silver lining: individual surveys showed growth in Germany’s private sector accelerated to hit the fastest rate so far this year. French business activity also grew faster than expected, returning to a rate not recorded since before the Nov. 13 attacks in Paris. “That suggests that the PMIs for the other major euro zone economies such as Italy and Spain will be soft when released next week,” said Stephen Brown at Capital Economics.

Looking at the aggregated level, while the headline composite PMI was above the 50 mark that separates growth from contraction, the index measuring prices businesses charge remained below it at 49.0, although that was an increase from last month’s 48.3. This, according to Reuters, may concern policymakers at the European Central Bank who have been battling to get inflation up to their 2 percent target ceiling. Consumer prices fell 0.2 percent in April, despite the Bank’s ultra-loose monetary policy.

Even with price discounting, new order growth slowed and there was no acceleration in activity in the bloc’s dominant service industry. A Reuters poll had predicted an increase to 53.3 but the PMI held steady at April’s 53.1. The manufacturing PMI fell to 51.5 from 51.7, missing the median Reuters poll forecast for 51.9, while an index measuring output dropped to 52.4 from 52.6.

Details in the data hint that there may be little or no improvement in June. Optimism among service firms fell to a 10-month low, with the sub-index plummeting to 61.7 from 64.5, and factory recruitment slowed.

“The flash PMIs provided slight disappointments to the markets,” said Tuuli Koivu at Nordea, who expects 0.3 percent growth in Q2. “However, the negative surprises were only minor ones and do not cause any changes to our GDP growth forecast.”

In other words, it will once again be all up to China once more; although considering it took a $1 trillion credit injection by China to buy the most modest of first quarter economic rebounds, it is questionable if Beijing can repeat this dramatic credit spree, especially after an April new loan report which as we commented just over a week ago, was very disappointing and as we warned, presaged a period of weakness for the global economy, as is now materializing.


Despite Greece’s depression, the crooks at the EU have forced hikes in VAT to 24% as well as added new taxes including lesser pensions.
Greece will go  further down the rabbit’s hole
(courtesy Mish Shedlock/Mishtalk)

Despite Depression, Greece Forced To Hike VAT, Add New Taxes

Submitted by Michael Shedlock via,

Greece remains in an economic depression interrupted by a few quarters of anemic growth.

Hiking taxes in a depression is one of the stupidest thing one can do, but Greece is set for another vote to do just that.

Prime minister Alexis Tsipras is once again prepared to kiss German Chancellor Angela Merkel’s behind, and his party will likely go along for the ride.

The wildcard IMF has yet to chime in on the economic stupidity of this hike.

Please consider Greece Set for Austerity Vote to Secure Bailout Cash.

Greece’s parliament is expected to vote late Sunday on a raft of fresh taxes and austerity reforms that the country must legislate to unlock further rescue loans, ahead of a crucial eurozone finance ministers meeting on Tuesday.


The bill includes the last portion of an austerity package worth €5.4 billion ($6.06 billion), or 3% of the country’s gross domestic product, which Greece has agreed on with its international creditors to implement by 2018 in exchange for fresh bailout funds under the terms of its third bailout deal.


The IMF has said it would only sign up to the Greek bailout if Germany agrees to debt relief. But German officials are seeking to delay any debt restructuring until the end of the current Greek bailout program in 2018, so that Germany’s parliament, the Bundestag, would pass such measures only after Germany’s 2017 elections.


To meet its targets, Athens was asked to set up a “contingency mechanism” of additional austerity measures worth some 2% of GDP.


The measures being voted on Sunday include new taxes on fuel, tobacco, alcohol, Internet, pay TV, hotel stays, cars, changes in property tax, as well as a rise in the basic value-added tax rate, applied to most goods and services, from 23% to 24%.


The Greek parliament is also expected to vote on the fiscal brake mechanism that would automatically cut state spending if Greece misses its budget targets.


How much the next bailout tranche would be is still to be determined, butEuropean Union officials indicate it could be €10 billion.


Another Humiliating Greece Cave-In

On May 14, I reported Greece “Demands” Debt Relief, Owes Troika €11+ Billion by July.

My comment: “Greece has caved in every time, and in the most humiliating ways. Greece even caved in on pension cuts last week. Why should anyone believe Greek demands now?

€10 billion would be a lot of money, if the money went to Greece. But virtually none of it will go to Greece.


Greece Short-Term Debt Timeline

Greece Debt Obligations1

Somehow I expect the next tranche to be a “greater than expected” €11 billion. Perhaps €10 billion will suffice if Greece has €1 billion of its own to pony up.


Greece Long-Term Debt Timeline

Greece Debt Obligations2

Payments to the Troika stretch all the way to 2059, while assuming Greece can maintain a primary account surplus of 3.5% the entire way.

The IMF says this is impossible, while proposing a surplus of 1.5%, also impossible.


Politics of Debt Relief

The IMF wants debt relief now, but Germany wants the IMF to hold off until Merkel wins reelection.

Meanwhile, the Greek depression resumes.

Greek Tax Hikes

These tax hikes are insane. The key question remains: Is the IMF bluffing about debt relief or not?


France hit by gas shortages as refinery workers go on strike and block all outgoing routes. There is no gas in the North West, North which includes Paris

(courtesy zero hedge)


France Hit By Gas Shortages, Rationing After Refinery Workers Go On Strike

In the wake of French president Francois Hollande using an obscure article of the constitution in order to bypass parliament and force through labor reforms that are viewed as unfavorable to workers, protests have been ongoing in the country.

Now, French refinery workers have launched a strike to hit the government where it hurts the most. Protesters have blocked deliveries to gas stations from at least half of France’s eight refineries, and workers at three Total refineries have voted to halt all output by Tuesday according to France 24.

The news sent drivers rushing to gas stations in order to fill up their tanks while they could.About 820 stations out of 11,500 in France were out of fuel on Sunday, and another 800 were lacking at least one type of fuel.

Prime Minister Manuel Valls said that the situation is fully under control, and that there are enough fuel reserves to deal with the blockade.

We have the situation fully under control. I think that some of the refineries and depots that were blocked are unblocked or will be in the coming hours and days. In any case, we have the reserves to deal with these blockades.”

Kristine Petrosyan, an oil market analyst for refining at the International Energy Agency adds “there is a noticeable fuel shortage in the North West and North of the country, including parts of the greater Paris region.”

Strikers aim to block access to fuel infrastructure, including refineries, fuel depots, and ports, so imports won’t reach consumers if fuel depots continue to be blocked. France is net gasoline exporter, “but world’s biggest diesel importer” – It imports ~420k b/d of diesel, and exports ~100k b/d gasoline.

Moments ago, Total chimed in as well, saying 612 of its French gas stations have a partial or full fuel shortage, as a result of 2 of 9 fuel depots being blocked by striking workers.

.@Total mobilisé – dispositif exceptionnel – doublement des ravitaillements . Point de situation à 13h30.

For now, it doesn’t appear the situation is “fully under control” in fact quite the opposite. And if the striking workers are indeed serious in their demands, the already unpopular French government may have just two options: walk back its labor reform law, or suffer a crippling economic slowdown, something which GDP “powerhouse” France can hardly afford.

Again Deutsche bank admits that it now rigged stocks.  It stock slides again
(courtesy zero hedge)

Deutsche Bank Slides After Mortgage Probe Unveiled; Admission It Rigged Stocks

A month after admitting to rigging precious metals markets, Deutsche Bank has been hit with a double-whammy of more alleged fraudulent behavior today and the stock is sliding. First, Reuters reports that the bank took a charge of 450 million euros for “equity trading fraud,” and then Bloomberg reports that The SEC is looking into Deutsche’s post-crisis mortgage positions.

First, as Reuters reports,

Germany’s Deutsche Bank said it took a charge of around 450 million euros (348 million pounds) last year in relation to share trading fraud, but declined to give any details on Monday.


The bank increased its provisions for “external fraud” to 475 million euros in 2015 from 20 million euros in 2014, according to its annual report.


“The increase in the event type ‘External Fraud’ is caused by a provision for equity trading fraud,” the bank said in the report, which was published in March.

And then, as Bloomberg reports,

SEC investigating whether Deutsche Bank inflated the value of securities in its mortgage-bond trading business, masked losses around 2013,according to people with knowledge of the matter.


Investigators looking at positions overseen by Troy Dixon, who at the time ran the bank’s trading for U.S. government- backed mortgage bonds known as agency pass-throughs.


SEC asking whether DB delayed recording losses on those securities over an extended period of time

And the result…


What happens next?



Erdogan now has absolute power as he  appoints a puppet for Premier:
(courtesy zero hedge)

Erdogan Nears Absolute Power With Appointment Of Puppet Premier, Stripping MPs Of Immunity

When the news hit on May 5 that Turkey’s Prime Minister Ahmet Davutoglu would unexpectedly stand down from his post as a result of sharply escalating fighting behind the scenes over president Tayyip Erdogan’s relentless attempt to rule Turkey with virtually no checks and balances, the market was not happy, and the volatility of the Turkish Lira soared the most in the past decade.


Since then the Turkish market has modestly tamed, even if the Erdogan’s push for supreme control has done anything but, and during today’s congress of Turkey’s AKP, Erdogan confirmed an impotent lapdog, Binali Yildirim – a close ally for two decades and a co-founder of the ruling AK Party – as his new prime minister on Sunday, which as Reuters explained was “a big step towards the stronger presidential powers [Erdogan] has long sought.” In plain English, Turkey is unofficially a dictatorship, in which Erdogan is president only in title and in reality a supreme despot as there is no longer anyone who can politically challenge the president.

Concurrently, Erdogan also accepted the resignation of outgoing Prime Minister Ahmet Davutoglu on Sunday, hours after AKP elected Yildirim as his replacement.

In a speech to AKP delegates who earlier elected him party leader at a special congress, Yildirim, transport minister for most of the past decade and a half, left no doubt that he would prioritise the policies closest to Erdogan’s heart. His main aim, he said, was to deliver a new constitution and create an executive presidency, a change Erdogan says will bring stability to the NATO member state of 78 million, but which opponents fear will herald greater authoritarianism.

Yildirim, 60, said constitutional change was a necessity to legitimize the existing situation, tacit acknowledgment that Erdogan has extended the traditionally ceremonial role of the Turkish presidency. “The most important mission we have today is to legalize the de facto situation, to bring to an end this confusion by changing the constitution,” he said. “The new constitution will be on an executive presidential system.”

Erdogan meets with incoming Prime Minister Binali Yildirim.

The constitutional change would give Erdogan unlimited power over virtually every aspect of governance.

As if proof were needed of where power in the party lies, delegates remained standing through a message from Erdogan read out at the start of the congress. Yildirim vowed that, under his leadership, the AKP’s way would be “Erdogan’s way“. Justice Minister Bekir Bozdag said Erdogan was the party’s one leader.

He has made clear he will pursue two of Erdogan’s biggest priorities – the executive presidency and the fight against militants of the outlawed Kurdistan Workers Party (PKK) in the largely Kurdish southeast. “They are asking us when the anti-terror operations will end. I am announcing hereby that operations will end when all our citizens are safe,” Yildirim said in an emotional speech.

“Operations will continue without pause until the bloody-handed terrorist organization PKK ends its armed actions.”

Despite Erdogan’s attempts to silence any journalistic criticism by sending his biggest public detractors to prison, some dares to voice their displeasure with what is happening inside the NATO member and Europe’s close Asian ally:

“If they can succeed, this will be a transition period for the executive presidency,” journalist Abdulkadir Selvi, who is seen as close to AKP, told Reuters.

And now that the Turkish premier figurehead is known, investors’ eyes shift to the future of Deputy Prime Minister Mehmet Simsek, who according to Reuters is seen as one of the remaining anchors of market confidence. Erdogan, who favors consumption-led growth, has repeatedly railed against high interest rates in Turkey, saying they cause inflation, a stance at odds with mainstream economics. Without Simsek, investors fear, it will be less likely that the government will deliver on promises to liberalize the labor market, encourage savings and bring in more private investment.

Installing a puppet PM was not all Erdogan did in this busy week: just to make sure Erdogan can use the law to crack down on any of his political opponents, last Friday Erdogan’s puppet parliament agreed to strip its members of immunity, a move which will be used by Erdogan to prosecute members of the pro-Kurdish HDP, parliament’s third-biggest party, as well as anyone else he choose to take down.

He accuses the HDP of being the political wing of the Kurdish Workers’ Party (PKK) which has waged a three-decade insurgency against the state. The HDP denies such links and says its parliamentary presence could be all but wiped out if prosecutions go ahead.

In other words, if any MP says or does something that the president disagrees with, said member of parliament will promptly find themselves under arrest and behind bars: a strong deterrent never to say or do anything that would displease the ascendant tyrant.

It is this stripping of immunity that Germany’s Chancellor Angela Merkel said she would discuss with Erdogan on Monday when the two meet tomorrow in Istanbul, voicing disquiet at a measure meant to sideline the pro-Kurdish opposition.

Erdogan meets with Merkel in Ankara, Turkey February 8, 2016

“Naturally some developments in Turkey are causing us grave concerns,” Merkel told the Frankfurter Allgemeine Zeitung on Sunday, one day before she meets Erdogan on the sidelines of a U.N.-sponsored humanitarian summit in Istanbul.

However, it’s not as if Merkel has any leverage or strings to pull. Quite the opposite: Merkel is facing accusations at home that she has become too accommodating of Erdogan as she tries to secure a European Union deal with Ankara to stem the flow of refugees from Turkey into Europe, the bulk of whom have gone to Germany.

Worse, the accusations are 100% accurate, because as of this moment the person who dictates the future of Europe is neither in Greece, nor in Great Britain, but is not even located in Europe in the first place (although that may change soon). This guy.

Then Erdogan’s house of cards just fell: the EU suspends plans to extend visa free travel for Turks:

Erdogan Furious After EU Suspends Plans To Extend Visa-Free Travel To Turkey

Two weeks ago a high-ranking deputy for Turkey’s ruling AKP party, Burhan Kuzu (also a former adviser to President Erdogan) issued an explicit threat to Europe which was at that time discussing whether or not to grant Turkey visa-free travel within the continent. Specifically, he tweeted that “The European Parliament will discuss the report that will open Europe visa-free for Turkish citizens. If the wrong decision is taken, we will unleash  the refugees!.” 

What followed were ever louder accusations lobbed German Chancellor Angela Merkel by her own government that the woman dubbed by many as the most powerful person in Europe had engaged in a series of appeasing actions to placate the increasingly more despostic Turkish president, just to keep the millions of refugees currently held behind Turkey’s borders in their place, and avoid a repeat of the social crisis that followed when tens of thousands of mid-east refugees would enter Germany every single day leading to a surge in the anti-immigrant, anti-Muslim and anti-EU AfD party. Indeed, as we among others speculated, it appeared as if Turkey has unlimited leverage over both Merkel and Europe, and could demand virtually anything.

That may have changed today because as Deutsche Welle reports, an EU plan that would extend visa-free travel privileges to Turkey as of July 1 will be delayed over worries Ankara won’t meet the key conditions on time. The German publication adds that “Chancellor Angela Merkel is in no mood to budge” in what is the first actual indication of resistance by the German to the increasingly more whimsical demands by the Turkish president.

As DW reminds us, Turkey has already agreed to take back refugees who have already used it as a transit country to enter Europe, in exchange for the visa-free deal, but the EU believes Ankara will not be able to implement reforms on freedom of the press and the judiciary by June 30.

Turkey’s 75 million citizens would have the right to enter the Schengen zone for up to 90 days at a time with biometric passports from the end of June. However, this deal has now been delayed indefinitely, and will certainly force an increasingly more irrational, and now infuriated, Turkish president to retaliate or else it will be his turn to be perceived as weak.

The EU has a list of 72 requirements that Ankara needs to meet to obtain visa-free travel, with reform of anti-terror legislation another of the five remaining key steps, along with the protection of personal data. “The questions I had in this connection have not been fully cleared up,” Merkel said.

Terrorists would be more likely to attack EU countries as a result of the deal to allow Turkish citizens to travel across the continent without visas, EU leaders said last week. “Foreign terrorists and organized criminals are ‘expected’ to seek Turkish passports to reach continental Europe ‘as soon as’ the visa waiver program comes into force,” a European Commission report said.

That was not the only grievance voiced by Merkel. As we previewed last night when we reported that in his latest attempt to seize absolute power Turkey had stripped PMs of diplomatic immunity in a step that would certainly lead to the incarceration of Erdogan’s political enemics, today Merkel met with Erdogan in Istanbul and said she had “made it very clear” that the move to strip about 25% of Turkish members of parliament (MPs) – many of whom are from the Kurdish minority – of their legal immunity as “a reason for deep concern.”

World leaders and aid groups met at an unprecedented aid summit in Istanbul, headed by UN Secretary General Ban Ki-moon. At the event Erdogan stressed Turkey’s contributions in hosting three million refugees from the Syria and Iraq conflicts.

“The current system falls short… the burden is shouldered only by certain countries, everyone should assume responsibility from now on,” he said. “Needs increase every day but resources do not increase at the same pace. There are tendencies to avoid responsibility among the international community.” He added that Turkey had spent $10 billion on hosting Syrian refugees, compared to $450 million from the rest of the international community.

The implication: send even more money over and above the $3 billion promised previously. And now that Erdogan’s failure to pass visa-free travel will be critized domestically with questions over his ability to govern without his former PM Ahmet Davutoglu, who was instrumental in getting the visa-waiver deal, the question is whether the infuriated Turkish leader will resort to making good on his threat, and once again send out countless refugees along the Balkan route whose end destination is well-known: the wealthy countries of Central Europe.




Well that did not take long.  New President Temer has just suffered his first corruption scandal implicating  the party;s planning Minister Juca and an executive with Petrobras. The theory here is that this will lead to many more in the car wash scandal including Temer:


(courtesy zero hedge)

Brazilian Risk Assets Slammed After New President Suffers First Corruption Scandal Crisis

Back on May 12, when Brazil’s disgraced president Dilma Rousseff was impeached in a move that according to her was a “coup” and a “farce”, we said that “Brazil’s problems are only just startingbecause “if Brazil is indeed seeking to cleanse its corrupt political class, Temer is hardly the right guy to do it. In fact, if markets believe that the Brazilian political situation will stabilize following the Rousseff “coup” as she calls it, we would be sellers for one simple reason: the man who may become Brazil’s next president is almost as unpopular as the leader facing impeachment now, and stained by scandals of his own.”

To be sure, the Brazil EWZ ETF peaked on May 12 and the price has been downhill ever since.

But the bigger problem is that the selling may have only just started, because what until recently was seen a salvation cabinet for Brazilian risk assets, is quickly turning into a just as substantial liability: as AP framed the “big question” two days ago, can acting Brazilian president Michel Temer “avoid ouster himself.

Some more of our observations:

Whether the Rio Olympics in just over two months are a disaster or not, however, one thing is certain – for months, the business community has been hoping that Temer would take over from the leftist Rousseff. But whether he’ll have the ability or appetite to take on major reforms, such as overhauling a costly pension system, is unclear. “I think that Temer is not going to be able to govern if he assumes the presidency,” said Jandira Feghali.

Today we got the first indication of just how much of an uphill climb the Temer administration will have when Brazil’s Folha de S. Paulo newspaper reported that it has had access to recordings of conversations that took place in March between then-senator Romero Juca, who is currently Brazil’s critical Planning Minister under Temer, and a former executive linked to state-run oil company Petrobras. In the conversations, the minister allegedly says a change in federal government leadership would lead to an agreement to prevent the wide corruption probe dubbed Carwash from proceeding.

Romero Juca

The immediate suggestion is that Juca himself, and likely Temer too, were implicated in Brazil’s vast “carwash” scandal, and as a result the Rousseff impeachment was nothing but a smokescreen to deflect attention from their own involvement.

According to Bloomberg, Juca’s lawyer, Antonio Carlos de Almeida Castro, didn’t deny the conversations between the minister and the former company executive, but added he saw no criminal implications in the exchange. “At no time was Juca speaking against Carwash or seeking to interfere with the operation,” Almeida Castro said in an interview.

In an interview with a local radio station on Monday, Juca said he didn’t “feel embarrassed” by the recordings and that he was still fit for his job. “I’m going to keep working to approve the fiscal deficit target.”

Juca and his lawyer may not be concerned but others are. As Bloomberg puts it, “the allegations against Juca raised questions about whether Temer will be able to avoid the fallout from investigations into the massive kickback scheme at Petrobras that has rocked the political establishment in the past year, resulting in the detainment of lawmakers and businessmen.”

Or precsely what we warned about less than 2 weeks ago. And if it took just 11 days for the first potential scandal to emerge, what will happen in aother 2 weeks, or a month? Temer will be president until Rousseff is ultimately booted from office six months from the date of her impeachment, a period that includes the critical Rio olympics: if his government is already mired in scandal, he will find himself just as impotent as his predecessor.

Although not politically fatal, the content of the recording entangles Romero Juca in Carwash even further,” analysts at MCM Consultores Associados said in a note to clients. “The pressure for Juca, an important name in political articulation and on the economic side, to leave the ministry will increase. The chances he leaves are higher, even because there could be more recordings.

MCM’s Ricard Ribeiro added that “while fiscal target is likely to still be approved this week, eventual new accusations targeting Temer government members could be a risk for approval of reforms that demand largest vote in Congress, such as the pension regime overhaul.”

Italo Abucater, the head of currency trading at ICAP Brasil, also chimed in saying that “I think this is too serious. This is the first crisis of many that may come through.”

But as Arko’s Lucas de Aragao perhaps summarized it best when he told Bloomberg, “Temer is having his first big political crisis with Juca.”

It won’t be the last.

The revelation of Juca’s recorded conversations could not come at a worse time for the new president: it follows a decision last week by the Supreme Court to authorize the release of Juca’s bank records and comes as Temer this week seeks the approval in Congress of measures aimed at shoring up government’s accounts.

The market reaction is hardly enthusiastic: as shown below, while the EWZ has tumbled to the lowest since early April, yields on local swap rates jumped, with the contract due Jan. 2019 rising 17 basis points to 12.63%. The move reflected the threat to both the government’s fiscal adjustment and governability in general, according to Luiz Eduardo Portella, partner at Modal Asset Management. The Brazilian real lost 1.3% while the cost to insure dollar-denominated government debt for five years rose 10 basis points to its highest level in nearly a month.

In retrospect, it would appear that rumors of Brazil’s political and economic resurrection have been greatly exaggerated.



The algo traders lift WTI back above 48 dollars:

(courtesy zero hedge)

Panic-Buyers Lift WTI Crude Back Over $48

Because… fundamentals…

Nothing says “Buy Oil” like the weakest US manufacturing PMI since 2009, dismal Japanese trade data, and the European economy collapsing.

Chatter is that the catalyst for the move is a Genscape report showing an inventory draw at Cushing


WTI had been sliding amid growing optimism for returning Canada production after weather relief over weekend helped firefighters battling wildfires that shut-in more than 1m b/d of production.

Brent extends drop into 4th day, falls below $48, as French refinery strikes add to bearish sentiment.

“Canada is coming back and refinery strikes in France are bearish for crude oil, although bullish for products,” says Petromatrix oil analyst Olivier Jakob. “The combination of these two is putting some pressure on oil”

As supply disruptions fade, prices drifted lower overnight amid tumbling growth guesses from dismal PMIs… and then US equities opened and the buying panic ensued.


Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/MONDAY morning 7:00 am




USA/CAN 1.3156 UP .0050

Early THIS MONDAY morning in Europe, the Euro FELL by 16 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite  CLOSED UP BY 18.16 PTS OR 0.64% / Hang Sang CLOSED DOWN 43.17 OR  0.22%   / AUSTRALIA IS LOWER BY 0.60%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE RED   as they start their morning/

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this MONDAY morning: closed DOWN 81.75 OR 0.49% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 43.17 PTS OR 0.22% . ,Shanghai CLOSED  UP 18.16 OR 0.64%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED /India’s Sensex IN THE RED

Gold very early morning trading: $1248.90


Early MONDAY morning USA 10 year bond yield: 1.821% !!! DOWN 3 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.609 DOWN 4 in basis points from FRIDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early MONDAY morning: 95.36 UP 1 CENT from FRIDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers MONDAY MORNING



And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield:  3.08% DOWN 1 in basis points from FRIDAY

JAPANESE BOND YIELD: -.094% DOWN 2 in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD:1.57%  DOWN 2 IN basis points from FRIDAY

ITALIAN 10 YR BOND YIELD: 1.48  UP 1 IN basis points from FRIDAY

the Italian 10 yr bond yield is trading 9 points lower than Spain.




Closing currency crosses for MONDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM


Euro/USA 1.1227 up .0005 (Euro =UP 5 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.17 DOWN 0.725 (Yen UP 725 basis points )

Great Britain/USA 1.4487 DOWN.0011 Pound DOWN 11 basis points/

USA/Canada 1.3128 UP 0.0021 (Canadian dollar DOWN 21 basis points with OIL FALLING a BIT(WTI AT $48.04).


This afternoon, the Euro was UP by 5 basis points to trade at 1.1227

The Yen ROSE to 109.17 for a GAIN of 73 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was DOWN 11 basis points, trading at 1.4487

The Canadian dollar FELL by 21 basis points to 1.3128, WITH WTI OIL AT:  $48.04

The USA/Yuan closed at 6.5533

the 10 yr Japanese bond yield closed at -.094% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2  IN basis points from FRIDAY at 1.831% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.618 DOWN 3 in basis points on the day ( HUGE POLICY ERROR)


Your closing USA dollar index, 95.18 PAR IN CENTS ON THE DAY/4 PM

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY

London:  CLOSED DOWN 19.89 OR 0.32%
German Dax :CLOSED DOWN 73.73 OR 0.74%
Paris Cac  CLOSED DOWN 28,80  OR 0.66%
Spain IBEX CLOSED DOWN 57.20 OR 0.65%

The Dow was DOWN 8.01  points or 0.05%

NASDAQ UP 3.78 points or 0.08%
WTI Oil price; 48.02 at 4:30 pm;

Brent Oil: 48.16





This ends the stock indices, oil price, currency crosses and interest rate closes for today

Closing Price for Oil, 5 pm/and 10 year USA interest rate:


BRENT: 48.36

USA 10 YR BOND YIELD: 1.833%

USA DOLLAR INDEX: 95.25 DOWN 10 cents


And now your more important USA stories which will influence the price of gold/silver




USA manufacturing collapses to 2009 level and these bozos are going to raise rates?

(courtesy PMI/zero hedge)


US Manufacturing PMI Collapses To 2009 Lows (As Fed Readies Rate Hike?)

So much for the huge China credit impulse spreading around the world. After this morning’s extremely disappointing European data, US Manufacturing’s flash PMI for May printed a disappointing 50.5 – its lowest since 2009.Under the surface the state of American manufacturing is even more disastrous as Markit notes, output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

It’s rate-hiking time…A general lack of pressure on operating capacity was signalled by the latest survey data, with outstanding work at U.S. manufacturers falling for the fourth successive month in May.

U.S. manufacturers signalled the first reduction in output since September 2009 in May, although the rate of decline was only marginal. A number of monitored firms mentioned that uncertainty around the general economic outlook had caused clients to delay spending decisions, which in turn prompted firms to trim their production schedules.


As Markit’s Chris Williamson warns, the weak manufacturing PMI data cast doubt on the ability of the US economy to rebound from its disappointing start to the year in the second quarter.

“The survey is signalling that manufacturing will act as a drag on economic growth in the second quarter, leaving the economy once again dependent on the service sector, and consumers in particular, to sustain growth.

“Output is falling for the first time since the height of the global financial crisis, with factories hit by slowing growth of order books and falling exports.

“Backlogs of work are also dropping at the fastest rate since the recession, meaning firms will be poised to cut capacity unless inflows of new work start to pick up again.

“The survey’s employment gauge is in fact already running at a level consistent with a further reduction in the official measure of factory payroll numbers.

“Any uplift in prices was largely due to higher commodity prices, notably oil. Core price pressures look to have been once again subdued by weak demand.”

Seems like a great time to be hiking rates?

The clowns have no idea what they are doing!!
(courtesy zero hedge)

Fed’s Williams Says “I Don’t Know What We’ll Do In June”

Some were concerned earlier today, when SF Fed’s John Williams said that he sees about 2-3 rate hikes in 2016, followed by another 3-4 in 2017, suggesting a grand total between 5 and 7 more rate hikes over the next 18 months. However, those fears were promptly dissiptated when as Williams himself admitted during the reporter Q&A, he – like virtually everyone else at the Fed – has no idea what he is talking about. To wit:


Clearly unwavering from having zero credibility, her also added the following:


Some more Fed “observations” on the economy:


And the punchline:


What he meant is “good thing” the Fed’s “dot plot” and rate hike forecast is closer to the market’s.




The top 10 big firms that have cut the most jobs: Great  reason to raise rates.

In order of job cutting:

(courtesy zero hedge)



These Are The Ten Companies That Have Cut The Most Jobs In 2016

After the US Manufacturing PMI plunged to 7 year lows today, we thought it relevant to remind everyone just how robust the economy is by showing the 10 companies that have cut jobs so far in 2016.

The Fiscal Times has compiled a list of 20 companies – here are the top ten “fiction peddlers” ignoring President Obama’s rhetoric…

1) National Oilwell Varco: 17,850

2) Wal-Mart: 16,000

3) Schlumberger: 12,500

4) Intel: 12,000

5) Halliburton: 10,200

6) Dell: 10,000

7) Chevron: 7,500

8) Buffets: 6,000

9) DuPont: 6,000

10) Weatherford International: 6,000

Not surprisingly the list is dominated by the tech and energy sectors, but those will bounce back in the second half of the year as growth pics up… right?



The following is continuation of a story we brought to your attention two weeks ago.  It now seems that the Central States Pension Fund which applied to cut current benefits to retirees by 60% is not enough.  Treasury states that they need to new plan to stave off bankruptcy, which is inevitable in 10 yr when they run out of money.

(courtesy Mish Shedlock)

407,000 Workers Stunned As Pension Fund Proposes 60% Cuts, Treasury Says “Not Enough”

Submitted by Michael Shedlock via,

407,000 private sector workers are about to lose most of their pensions.

I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go Broke by 2025.

The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.

Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.

The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.

Please consider Pensions May be Cut to ‘Virtually Nothing’ for 407,000 People.

The Central States Pension Fund has no new plan to avoid insolvency, fund director Thomas Nyhan said this week. Without government funding, the fund will run out of money in 10 years, he said.


At that time, pension benefits for about 407,000 people could be reduced to “virtually nothing,” he told workers and retirees in a letter sent Friday.


In a last-ditch effort, the Central States Pension Plan sought government approval to partially reduce the pensions of 115,000 retirees and the future benefits for 155,000 current workers. The proposed cuts were steep, as much as 60% for some, but it wasn’t enough. Earlier this month, the Treasury Department rejected the plan because it found that it would not actually head off insolvency.


The fund could submit a new plan, but decided this week that there’s no other way to successfully save the fund and comply with the law. The cuts needed would be too severe.


Normally, when a multi-employer fund like Central States runs out of money, a government insurance fund called the Pension Benefit Guaranty Corporation (PBGC) kicks in so that retirees still receive some kind of benefit.


But that’s not a great solution in this case. For one thing, the amount is smaller than what pensioners would have received under the Central States reduction plan, and is based on the number of years a retiree worked. A retiree would receive a maximum $35.75 a month for each year worked, according to the fund’s website. (That amounts to $1,072.50 a month for retiree who worked 30 years.)


But there’s yet another problem. The PBGC itself is underfunded and isn’t expected to be able to cover all the retirees in the Central States Pension Fund.

Dear Beneficiary

Central States Pension2

Click here for the entire “Dear Beneficiary” letter.

This is a sad saga for which there is no happy ending.


Public Union Whiners

An Illinois state worker was whining earlier today about my post Chicago Pension Liabilities Jump 168%, Understated by $11.5 Billion.

When private pension plans go broke, they go broke. Public pension expect a bailout.

I replied to the person whining … “Corrupt politicians got in bed with corrupt union leaders making promises both knew could not be met.”

Public workers have no idea how well off they are vs. the private sector, yet they demand, more, and more and more, from a state that is broke.

Taxpayers owe the Chicago pension fund absolutely nothing. Bankruptcy is the solution.

The IRS is now cracking down on tax evaders:  first on the list Morris Zukerman, former head of Morgan Stanley energy group who evaded 45 million in taxes plus fraud in the creation of phony invoices hiding the taxes owed
(courtesy zero hedge)


Former Head Of Morgan Stanley Energy Group Indicted for Evading $45 Million In Taxes

In the aftermath of the Panama Papers revelations, US authorities including the IRS appear to have begun a crackdown on tax evaders (if staying away from Washington D.C. for the time being for obvious reason), and according to Bloomberg they just landed a juicy target in the face of Morris Zukerman, a former head of Morgan Stanley’s energy group who now runs a private investment firm, who was indicted in Manhattan on charges of evading more than $45 million of federal and New York state taxes.

Bloomberg reports that  Zukerman failed to report profits from the sale of an equity stake, lied to his accountants, created phony and backdated documents and shipped paintings to addresses in Delaware and New Jersey to avoid New York state sales tax on artwork that hangs in his Park Avenue duplex, according to the indictment. He also took improper tax deductions, according to the indictment.

Zukerman, 71, runs M.E. Zukerman & Co Inc., which invests in “stable assets used to produce, gather, process, transport, store, refine or distribute crude oil, natural gas and related products,” according to the company’s website.

He is a graduate of Harvard College and Harvard Business School and studied economics at Cambridge University, according to a biography on his firm’s the site. He worked at Morgan Stanley from 1972 to 1988 and helped manage the firm’s global merchant banking operations.

Bix Weir, is a very colourful guy with some strange theories as to how this gold =/banking fraud will end.
However today’s commentary with Greg Hunter is pretty good and very close to what we feel is happening to Deutsche bank right now
We conclude tonight with this wrap up courtesy of Greg Hunter and Bix Weir
(courtesy Greg Hunter/Bix Weir/USAWatchdog)

All Electronic Assets Wiped Out in Fall Crash

Bix WeirBy Greg Hunter’s  (Early Sunday Release)

Financial analyst Bix Weir has laid out a timeline for the next financial collapse that he says is underway. Bix explains, “It’s happening now, and it has been happening since the beginning of the year.  Some of the big things on the time line and one of the bigger things to watch is the Deutsche Bank (DB) implosion.  That’s going to be gigantic because Deutsche Bank is the largest derivative holder in the world.  Their stock is plummeting, and they are begging for tier 1 capital.  It’s all happening right now.  The question is what is the day that Deutsche Bank throws up its arms and says we’re insolvent?  We are many times insolvent, and that would just destroy the European markets.  It will also destroy the U.S. markets because our biggest banks are invested in the sovereign debt of European countries.  That’s how it is going to start, and I believe the end of the end will be the Deutsche Bank implosion. . . .This is why Deutsche Bank is paying huge interest rates now because they need to raise their tier 1 capital.  They have to raise tier 1 capital before they report for the second quarter.  They are in massive trouble.  Their tier 1 capital is being destroyed by all these losses and lawsuits.  Didn’t they lose $7 billion euros last year? . . . They need massive amounts of capital . . . and they are willing to pay 5% interest just to get past the second quarter.  That’s the amazing thing. . . . Deutsche Bank is going to be gone by the end of the third quarter.”

Weir wrote a recent article that said a “Trump/Sanders ticket would galvanize the nation.” A Trump/Sanders ticket this fall for the White House?  Sound crazy?  Weir predicts that things will get so bad “the USA must Unite or Die.” Weir contends, “If Trump wins it alone, you are going to see a revolution overnight.  You are going to see mass rioting in the streets because there are so many people disenfranchised and angry.  Where is the anger going to be placed when people lose their 401-Ks, checking accounts and savings accounts?  The banks and the rich.  You cannot have Trump leading us forward after that moment.  You need both.  You need the left and you need the right.  I think Sanders and Trump have some kind of back deal going on with the people who are leading their campaigns.  They are going to come together when this chaos happens. . . . Any other scenario and you can kiss the United States goodbye in a blink of an eye.  The key is, with these guys (Trump and Sanders), they both love their country.  They approach it in different ways, but they both love their country.”

Weir expects his timeline to hit a financial crescendo in the September/October time frame. Weir says, “The Fed and the Treasury are controlling all markets with computer programs.  I have proved this a zillion times.  They are doing it with the programs that Alan Greenspan wrote in the 1960’s and 1970’s.  It has always been the plan to destroy the dollar and go back to a gold standard.  Everything is on lockdown.  You are not going to see wild swings and crashes until it’s time to pull the plug.  Right now, they are getting everything in line. . . . There are all kinds of things being put into place before they click that mouse and crash the system. . . . It’s so easy to do.  Computers are unbelievably powerful.  They are more powerful than we know. . . . Silicon Valley doesn’t have the most powerful computers.  It’s the Fed, the Treasury and the military that have the most powerful computers. . . .They can end it in a blink of an eye.”

Weir ends by saying, “Right now, the idea is to control it and keep the system going until we get into mid to late summer. Then, the plug is going to be pulled.  Then, the bad guys will be exposed, and then we have a bigger problem.  They are going to force Trump and Sanders to come together for the good of the country because we have to be united going into this. . . .The crash will be electronic.  All electronic assets will be frozen and be wiped away.  Exchanges will not be open. . . . Nothing will be open and nothing will reopen.  We will get rid of the nanny state. . . . There is no way we are ever going to pay off this debt.  If there is a crash in the markets, and all the debts and electronic assets were wiped clean, we would win.  The U.S. is the largest debtor nation in the world.  That was always the plan.”

Join Greg Hunter as he goes One-on-One with Bix Weir founder of

(There is much more in the video interview.)

After the Interview:


see you tomorrow night


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