June 8/Gold standing for June rises to 49.110 tonnes and we are now back to levels seen on first day notice/Japan’s largest banks exits the purchase of Japanese Government Bonds/Rhetoric between China and the USA intensify as USA planes come close to Chinese territorial waters/ The big German Commerzbank now states that it will hoard physical Euros rather than deposit them at the ECB/

Good evening Ladies and Gentlemen:

I will be reporting at my normal time June 9.2016

Gold:  $1,259.80 UP $15.40    (comex closing time)

Silver 16.97  UP 60 cents

In the access market 5:15 pm

Gold $1262.50

silver:  17.03


i) the June gold contract is an active contract. Late last night we had a smaller  123 notices filed for 12300 oz.  The total number of notices filed in the 7 days is enormous at 13006 for 1,300,600 oz.  (40.54 tonnes) WHAT IS MORE FASCINATING WAS OUR FRONT JUNE MONTH  INCREASED IN NET OI BY 678  CONTRACTS LAST THURSDAY(67,800 OZ).  ON FRIDAY IT INCREASED BY 78 CONTRACTS OR 7800 OZ, ON MONDAY IT INCREASED BY 264 CONTRACTS OR 26400 OZ. YESTERDAY, IT INCREASED BY 284 CONTRACTS. FOR 28,400 OZ. AND TODAY IT INCREASED BY 38 CONTRACTS OR 3800 OZ. THE ENTITY STANDING DOES NOT WANT FIAT AND IT SURE LOOKS LIKE A SOVEREIGN IS STANDING FOR GOLD.

Let us have a look at the data for today


Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 272.56 tonnes for a loss of 30 tonnes over that period


In silver, the total open interest FELL by 989 contracts DOWN to 192,376 DESPITE THE FACT THAT THE PRICE OF SILVER WAS DOWN by only 5 cents with respect to YESTERDAY’S trading. In ounces, the OI is still represented by just under 1 BILLION oz i.e. 0.962 BILLION TO BE EXACT or 137% 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 rose by a CONSIDERABLE 3,682 contracts UP to 496,330 DESPITE THE FACT THAT the price of gold was DOWN BY  $0.20 with YESTERDAY’S trading (at comex closing).


With respect to our two criminal funds, the GLD and the SLV:


We had no change  in inventory from the GLD/Inventory rests at  881.15 tonnes.

And now for SLV

We had no change in inventory into the SLV Inventory/Tonight it rests  at 338.725 million oz.

Both the GLD and SLV are massive frauds as they have no metal behind them!


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

1. Today, we had the open interest in silver FALL by 989 contracts DOWN to 192,376 despite the fact that the price of silver was DOWN BY ONLY 5 cents with YESTERDAY’S trading. The gold open interest ROSE by 3,682 contracts UP to 496,330 DESPITE THE FACT THAT GOLD WAS  DOWN $0.20 YESTERDAY.

(report Harvey).


2 a) Gold trading overnight Europe, Goldcore

(Mark OByrne/

2b)  Gold trading earlier this morning USA;

(/zero hedge)


i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 8.89 PTS OR 0.30% /Hang Sang closed DOWN 30.36 OR 0.14%. The Nikkei closed UP 155.47 POINTS OR 0.93% Australia’s all ordinaires  CLOSED DOWN 0.02% Chinese yuan (ONSHORE) closed DOW at 6.5715 Oil ROSE to 51.12 dollars per barrel for WTI and 52.09 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5771 yuan to the dollar vs 6.5715 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS) 



The following is a major story and will no doubt have implications going forward for the central bank of Japan.  Today we find that Japan’s biggest bank has quit being a primary dealer for sovereign bonds.  The reason for them leaving is simple:  negative interest rates are killing their balance sheet and they see no reason to buy the bonds.  Actually bank levels of owing sovereign bonds have fallen as the Central Bank gobbles up 100% of new issuance;

( zero hedge)


i)The rhetoric between China and the USA grows louder by the day.  China now states that a USA plane entered South China Seas again and close to China’s air space.  China sent up two planes to intercept the USA plane.  China states that the USA is deliberating hyping up the situation.

I think China will send a message to the USA in the form of a run on gold and silver at the comex

( zerohedge)

ii) Chinese oil imports drop to 4 month lows.  A good indicator that their economy is slowing and thus the global economy is slowing down.

(courtesy zero hedge)


i)We now witness the growth in euro skeptic parties that wish to leave the Euro.

The 4 star party of Italy headed by Grillo now has the support of the majority in Italy as 48% of citizens want to leave the Euro.Economics is playing a major role here as unemployment in the south of Italy is extremely high.

We have been detailing problems that citizens have in France and England.

However the bigger threat to the European union would be a German-exit. Germany has a a major problem in that it is the major creditor of Europe through target 2 balances and many of individual sovereign European bills have not been paid like Greece.  Because the Euro is weak, Germany has been the net winner as it can export cheaply to China and the USA at the expense of other nations. However the threat in Germany is whether the ECB and the target 2 balances go bust and cannot be paid and thus Germany leaves the EU

( John Mauldin)


ii)In March we reported that Munich Re the huge German insurance giant was buying gold and were hoarding cash in order to avoid the “fees” to the ECB as part of the negative interest rate policy.  Now we see another NIRP blowback: the German bank, Commerzbank is also planning to hoard billions of paper Euro notes in vaults in order to avoid the ECB fees..  However the German bank must pay for fire insurance in case billions of notes are put up in flames.  What a complete joke!

( zero hedge)

iii)Extremely important:

today the ECB is buying corporate bonds.  They are already buying 2.5 x the issuance of government bonds.  The yields on corporate debt, investment grade are trading at less than 1%, as the ECB sets on buying 5 billion euros worth of corporate per month. The pundits believe that they will not be able to purchase that quantity for long.
( zero hedge)

iv)We have been highlighting the plight of Banco Popular over the past month.  It now seems that a scandal is brewing.  The rights offering has been underwritten by 10 major banking entities but it does not seem enough money has been raised.  So Banco Popular went to its own customers to loan them money as long as they bought shares in the bank.  That is totally illegal in Spain.

( Wolf Street/Don Quijones)


none today


none today


i) OIL breaks into the 51 dollar column and oil is now double from its February lows:

 (zero hedge)


ii)Crude all over the map as inventories drop due to the expected increase use as the summer months are upon us.  However production increases:  shale?



i)Do not pay any attention to this:  China has stashed huge amounts of gold with China’s banking system.  They decide arbitrarily when to increase their official reserves which now stand at 1808 tonnes of gold.

( Bloomberg/GATA)

ii )It now seems that Mervyn King  former Governor of the Bank of England is joining the “younger” Alan Greenspan as a gold advocate!( Mike Kosares/GATA)


iii) Interesting!  The UK Mint will now sell pension investors gold.  Strangely they are not allowed to take delivery of their metal nor see it at any time

(London’s Financial Times/GATA)


i)Very unusual:  USA bond yield on the 10 yr tumbles below 1.70% and the Dow rises?

( zero hedge)

ii)The following ought to confuse the Fed even more.  Hirings tumble in the JOLTS latest data despite the fact that job openings are rising to record highs. When the market expands, job openings rise.  When the market contracts, job openings fall.  It will be difficult for the Fed to raise rates if they do not understand what is happening on the labour scene

( zero hedge)

iii)And the following is going on in DC with respect to the labour scene.  In DC the minimum wage went up from $8.25 to 11.50 per hour a year ago and then today, a new law proclaiming the rate to rise to $15.00 per hour is creating havoc for our employers.  Almost 50% of employers have decided to cut jobs or reduce hours. The CEO of McDonald’s was correct:  by raising the minimum rate , other workers will seek higher rates.  Also the higher rate cuts off thousands of entry level workers.( zero hedge)


Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 496.330  for a GAIN of 3,682 contracts AS THE PRICE OF GOLD WAS UP $0.20 with respect to YESTERDAY’S TRADING.  WE HAVE ENTERED THE SECOND BIGGEST DELIVERY MONTH OF THE YEARTHAT IS JUNE, A VERY ACTIVE MONTH. 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. IN THE MONTH OF MAY THE LATER HAD STOPPED. DURING THE MAY WE DID WITNESS A GRADUAL RISE IN AMOUNT STANDING AND THE AMOUNT STANDING AT THE CONCLUSION OF THE MONTH FINISHED AT ITS ZENITH..  IN JUNE, ON FIRST DAY NOTICE WE HAVE CERTAINLY WITNESSED THE FORMER, A HUGE LOSS OF TOTAL OPEN INTEREST CONTRACTS FOR THE ENTIRE GOLD COMEX COMPLEX . IN A VERY SURPRISING TURN OF EVENTS  AGAIN TODAY, THE JUNE OPEN INTEREST ROSE WHICH CERTAINLY SUGGESTS A MAJOR ENTITY IS STANDING AND MOSTLY LIKELY A SOVEREIGN LIKE CHINA

The FRONT gold contract month of June saw it’s OI fall to 2906 for a loss of 1080 contracts. We had 1118 notices filed yesterday, so we GAINED AGAIN 38 contracts or 3800 additional oz standing FOR METAL. The next active contract month is July and here we saw it’s OI ROSE by 42 contracts UP to 2382. The next big active contract month is August and here the OI ROSE by 3,330 contracts UP to 358,741. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was FAIR at 185,304. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was extremely poor at 129,899 contracts. The comex is not in backwardation.

Today we had 123 notices filed for 12,300 oz in gold.


And now for the wild silver comex results. Silver OI FELL by 989 contracts from 193,365 DOWN to 192,376 DESPITE THE FACT THAT the price of silver was DOWN BY ONLY 5 cents with YESTERDAY’S TRADING. The front month of June saw it’s OI fall by 0 contracts REMAINING AT 348. We had 0 notices filed yesterday, so we neither lost nor gained any ounces that will stand for delivery. The next big delivery month is July and here the OI fell by 8,611 contracts DOWN to 107,376. The volume on the comex today (just comex) came in at 72,376 which IS EXCELLENT. The confirmed volume YESTERDAY (comex + globex) was excellent at  73,768. Silver is not in backwardation . London is in backwardation for several months.
We had 0 notices filed for nil oz.

JUNE contract month:

INITIAL standings for JUNE

June 8.
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil  1929.000oz



Deposits to the Dealer Inventory in oz 2,600.000.000 OZ


Deposits to the Customer Inventory, in oz   96,032.150 oz


No of oz served (contracts) today 123 contracts
(12,300 oz)
No of oz to be served (notices) 2783 contracts

278,300 oz

Total monthly oz gold served (contracts) so far this month 13,006 contracts (1,300,600 oz)


Total accumulative withdrawals  of gold from the Dealers inventory this month   1400.01 OZ
Total accumulative withdrawal of gold from the Customer inventory this month  84,215.4 OZ

Today we had 1 dealer DEPOSIT

i) into Brinks 2,600.00

total dealer deposit:  2,600.000 0z


Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 1 customer deposit:

i) into Scotia:  96,032.150 oz

Total customer deposits;  96,032.150 OZ

Today we had 1 customer withdrawals:

I) OUT OF SCOTIA 1929.000  (60 KILOBARS)

total customer withdrawals:  1929.000  60 kilobars

Today we had 0 adjustments


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 123 contracts of which 49 notices was stopped (received) by JPMorgan dealer and 55 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JUNE contract month, we take the total number of notices filed so far for the month (13,006) x 100 oz  or 1,300,600 oz , to which we  add the difference between the open interest for the front month of JUNE (2906 CONTRACTS) minus the number of notices served upon today (123) x 100 oz   x 100 oz per contract equals 1,578,900 oz, the number of ounces standing in this active month.  This number is EXTREMELY huge for JUNE.  THE AMOUNT STANDING FOR GOLD IN MAY HELD THROUGHOUT THE MONTH AND ACTUALLY INCREASED AS THE MONTH PROCEEDED. AND IT SURE LOOKS LIKE IT WILL HAPPEN AGAIN IN JUNE.  THE BANKERS JUST RECEIVED THEIR MINSKY MOMENT!! 
Thus the INITIAL standings for gold for the JUNE. contract month:
No of notices served so far (13006) x 100 oz  or ounces + {OI for the front month (2906) minus the number of  notices served upon today (123) x 100 oz which equals 1,578,900 oz standing in this   active delivery month of JUNE (49.110 tonnes).
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 49.110 tonnes of gold standing for JUNE and 51.12 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 6.889 TONNES FOR MAY + 48.836 TONNES FOR JUNE + 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-May 27 .0185 – .024 TONNES MAY 31 -jUNE 4: .5044   = 65.813 tonnes still standing against 51.04 tonnes available.
 Total dealer inventor 1,643,563.321 tonnes or 51.12 tonnes
Total gold inventory (dealer and customer) =8,762,934.967 or 272.56 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 272.56 tonnes for a loss of 30 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.
And now for silver

June initial standings

 June 8.2016

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory  141,069.160 oz


Deposits to the Dealer Inventory NIL
Deposits to the Customer Inventory   nil
No of oz served today (contracts) 0 CONTRACTS 

nil OZ

No of oz to be served (notices) 348 contracts

1,740,000 oz

Total monthly oz silver served (contracts) 202 contracts (1,010,000 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  12,244,141.7 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 0 customer deposit:

Total customer deposits: nil oz.


We had 1 customer withdrawals

ii) Out of Scotia:141,068.160  oz


total customer withdrawals:  141,068.160 oz



 we had 0 adjustment



LOOKS LIKE WE ARE HAVING A BANK RUN AT THE SILVER COMEX/today 141,068 z leaves the customer account (eligible acct) 
The total number of notices filed today for the JUNE contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in JUNE., we take the total number of notices filed for the month so far at (202) x 5,000 oz  = 1,010,000 oz to which we add the difference between the open interest for the front month of JUNE (348) 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 JUNE contract month:  202 (notices served so far)x 5000 oz +{348 OI for front month of JUNE ) -number of notices served upon today (0)x 5000 oz  equals  2,750,000 of silver standing for the JUNE contract month.
We neither lost nor gained any silver ounces standing for this non delivery month of June.
Total dealer silver:  22.482 million  (RECORD LOW INVENTORY)
Total number of dealer and customer silver:   153.023 million oz
The total open interest on silver is NOW moving away from an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is NOW AT  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.
And now the Gold inventory at the GLD
June 8/no change in inventory at the GLD/Inventory rests at 881.15 tonnes
june 7/ a tiny withdrawal of .29 tonnes of inventory/probably to pay for fees/Inventory rests at 881.15 tonnes
June 6/no change in gold inventory at the GLD/Inventory rests at 881.44 tonnes
June 3/ We had two big  sized deposits of 4.46 tonnes early this morning and then another 6.24 tonnes late tonight/ new GLD total: 881.44 tonnes  (total: 10.7 tonnes)
June 2/no change in gold inventory at the GLD.Inventory rests at 870.74 tonnes
June 1.2016/ a good sized deposit of 2.08 tonnes/Inventory rests at 870.74 tonnes
May 27/no change in gold inventory at the GLD/Inventory rests at 868.66 tonnes
May 26./no change at the GLD/Inventory rests at 868.66 tonnes
May 25./no change in gold inventory at the GLD/Inventory rests at 868.66 tonnes
MAY 24/ a good sized withdrawal of 3.86 tonnes of paper gold from the GLD/Inventory rests at 868.66 tonnes
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..

June 8.:  inventory rests tonight at 881.15 tonnes


Now the SLV Inventory
June 8/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
june 7/ we had a huge addition (deposit) of 1.456 million oz into the SLV/Inventory rests at 338.725 million oz/
June 6/no change at the SLV/Inventory rests at 337.299 million oz/
June 3/ a huge deposit of 1.56 million oz was added to the SLV inventory/new inventory rests at 337.299 million oz
June 2/no change in silver inventory at the SLV/Inventory rests at 335.739 million oz
June 1/no change in silver inventory at hte SLV/inventory rests at 335.739  million oz
May 27/no change in silver inventory at the SLV/Inventory rests at 335.739 million oz/
May 26./ no change in silver inventory at the SLV/Inventory rests at 335.739 million oz
May 25./no change in silver inventory at the SLV/Inventory rests at 335.739
MAY 24/no change in inventory at the SLV/Inventory rests at 335.739 million oz
May 23./we had a small withdrawal of 285,000 oz and that generally means payment of fees.Inventory rests at 335.739 million oz
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/
June 8.2016: Inventory 338.725 million oz

NPV for Sprott and Central Fund of Canada


1. Central Fund of Canada: traded at Negative 4.6 percent to NAV usa funds and Negative 4.6% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.7%
Percentage of fund in silver:37.0%
cash .+1.3%( June 8/2016). /
2. Sprott silver fund (PSLV): Premium FALLS  to -0.16%!!!! NAV (June 8.2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO +1.78% to NAV  ( June 8.2016)
Note: Sprott silver trust back  into NEGATIVE territory at -16% /Sprott physical gold trust is back into positive territory at +1.78%/Central fund of Canada’s is still in jail.


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

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne (Goldcore)

Pensions Timebomb in “Slow Motion Detonation” In U.S., EU and Internationally

The ‘pensions timebomb’ is in “slow motion detonation” in the U.S, EU and internationally as pension funds around the world begin to go bankrupt.

Max Keiser and Stacy Herbert discuss the end of retirement which many Americans, Britons, Europeans and others will suffer as their pensions are decimated in the coming years due to zero percent interest rates and ultra loose monetary policies pursued for the benefit of banks and corporations.

Governments and central banks bailed out banks at the expense of pensioners and the pensions of workers who have been “thrown under the bus”.

In the second half, Max interviews Constantin Gurdgiev, Professor of Finance at Middlebury Institute of International Studies, about the debt situation in Europe and the NAMA and Irish water debacles.

Constantin points out how Ireland’s economic recovery, the EU’s ‘poster boy’ of recovery is tentative at best and based on less than sounds fundamentals.

Diversification remains the key to weathering the impact of the ‘pensions time bomb’. The traditional and typical retirement  or pension fund of simply owning a balanced portfolio of just paper assets – equities, bonds and a small allocation to cash – is now a recipe for financial disaster. This is especially the case given the rich valuations seen in stock indices globally but also the fact that global bond markets are at all time record highs due to QE and central bank’s ultra loose monetary policies.

Having a pension without an allocation to gold today is high risk in the extreme and gold has never been more important as a hedging instrument, safe haven asset and pension portfolio insurance.

Direct legal ownership of individually segregated and allocated gold coins and barswill again protect and grow wealth in the coming years.

Recent Market Updates
– Gold Surges After Poor Jobs Number, Growing Risk Of BREXIT
Silver – Perfect Storm Brewing in the Market
– Martin Wolf: There Will Be Another “Huge” Financial Crisis
– Silver Price To Surge 800% on Global Industrial and Technological Demand

– BREXIT Gold Diversification As Vote Fuels Market Uncertainty
– Gold Forecasts Revised Higher – Citi Says “Buy the Dip”
– Gold Should Rise Above $1,900/oz -“Get In Now!”

7 Key Storage Must Haves - Copy (1)Learn the risks inherent in paper and digital gold

Gold Prices (LBMA AM)
08 June: USD 1,241.10, EUR 1,091.42 and GBP 851.02 per ounce
07 June: USD 1,241.10, EUR 1,091.42 and GBP 851.02 per ounce
06 June: USD 1,240.55, EUR 1,092.67 and GBP 859.08 per ounce
03 June: USD 1,211.00, EUR 1,086.63 and GBP 839.34 per ounce
02 June: USD 1,215.50, EUR 1,085.32 and GBP 842.10 per ounce

Silver Prices (LBMA)
08 June: USD 16.31, EUR 14.36 and GBP 11.18 per ounce
07 June: USD 16.31, EUR 14.36 and GBP 11.18 per ounce
06 June: USD 16.40, EUR 14.46 and GBP 11.39 per ounce
03 June: USD 16.10, EUR 14.45 and GBP 11.17 per ounce
02 June: USD 15.98, EUR 14.27 and GBP 11.07 per ounce

Mark O’Byrne
Executive Director
Gold trading this morning:  gold hits the 1260 level and silver at 17.00 dollars as the world is reacting to the lower dollar
(courtesy zero hedge)

Gold & Silver Are Surging As Post-Payrolls Buying Accelerates

Gold has topped $1260, and Silver $17 as the post-payrolls buying-spree accelerates, dramatically outperforming stocks and bonds…



Sending PMs soaring above key levels…

click image for huge legible version.


Precious metals are surging as Fed credibility plunges.

Goldman explains one reason for the renewed interest in precious metals as they note that gold can provide a hedge in currencies with anchored real yields…

The correlation of the S&P 500 with gold has been close to zero on average since the 1990s and outside of the late 1980s and1990s drawdowns and gold provided a hedge in large equity drawdowns. While the current real gold price appear elevated, compared to the S&P 500 it appears low (Exhibit 23).

Gold is often perceived as a ‘safe haven’ that protects value in several adverse scenarios: inflation, deflation and financial market stress.

The gold rally into and post the GFC has been alongside a steady decline of real yields (Exhibit 24) and going forward higher US real yields might weigh on gold prices in US$. However, gold should be able to provide a hedge in currencies where real yields are anchored and there is less reflation momentum such as Europe and Japan.

What might also support gold in those countries is that gold can be a store of value in a time of more negative rates and with comparably low storage costs.

Do not pay any attention to this:  China has stashed huge amounts of gold with China’s banking system.  They decide arbitrarily when to increase their official reserves which now stand at 1808 tonnes of gold.
(courtesy Bloomberg/GATA)

China paused monthly gold purchases in May after prices surged


By Bloomberg News
Tuesday, June 7, 2016

China, the world’s biggest producer and consumer of gold, took a break from adding bullion to reserves in May after prices soared 22 percent in the first four months of the year.

The People’s Bank of China kept assets unchanged after boosting them for 10 straight months through April following the disclosure of a 57 percent increase since 2009. Holdings had expanded 9 percent since the start of July to 58.14 million ounces or about 1,808 metric tons, according to central bank data.

“I wouldn’t read too much into one month of data but higher prices have probably played a role in the slowdown in accumulation,” Simona Gambarini, a commodities economist at Capital Economics Ltd. in London, said by e-mail. “That said, the case for reserve diversification away from the dollar remains strong. With around a third of global government debt yielding negative interest rates, gold remains a valuable alternative.” …

… For the remainder of the report:






It now seems that Mervyn King  former Governor of the Bank of England is joining the “younger” Alan Greenspan as a gold advocate!

(courtesy Mike Kosares/GATA)


Mike Kosares: Former Bank of England head joins Greenspan as gold advocate


By Michael J. Kosares
USAGold.com, Centennial, Colorado
Tuesday, June 7, 2016

In “The End of Alchemy,” Mervyn King, the former head of the Bank of England, writes of central banks’ frustration in dealing with the stagnant global economy. “Central banks,” he says, “have thrown everything at their economies, and yet the results have been disappointing, Whatever can be said about the world recovery since the crisis, it has been neither strong, nor sustainable, nor balanced.”

Similarly, former International Monetary Fund chief economist Olivier Blanchard was recently quoted in the Financial Times as saying: “And so the question is why is it, that with no fiscal consolidation and banks in decent shape, at least in terms of lending, and zero interest rates, we don’t have an enormous demand boom? That is now the puzzle.” …

… For the remainder of the commentary:





Interesting!  The UK Mint will now sell pension investors gold.  Strangely they are not allowed to take delivery of their metal nor see it at any time

London’s Financial Times/GATA)


UK’s Royal Mint will sell pension investors gold they can never see


Royal Mint Opens Gold Vault to Pension Investors

By Josephine Cumbo
Financial Times, London
Wednesday, June 8, 2016

The Royal Mint is to open up its gold vaults to UK pension investors for the first time.

From Wednesday, Royal Mint will make some of its gold bars available to investors wanting to hold it in tax-efficient pension pots.

“For UK citizens, this is the first time that Royal Mint gold bullion has been authorised by HM Revenue & Customs … for holding in specific pensions,” said Chris Howard, the Royal Mint’s director of bullion. …

Investors are to be offered a choice of bullion, from Royal Mint Refinery 100-gram and 1-kilogram bars, to Signature Gold — a service that allows customers to purchase and own a share of a 400-ounce gold bar. …

Investors will not be able to opt for less expensive Royal Mint bullion coins to hold in their pensions because the products have not been authorised by HMRC. …

Pension investors purchasing gold bars through the Royal Mint will not be able to take delivery of their purchases as they will be placed in storage in “The Vault,” the Royal Mint’s secure storage facility in Wales. …

… For the remainder of the report:



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




2 Nikkei closed UP 155.47 OR 0.93% /USA: YEN FALLS  TO 107.07

3. Europe stocks opened ALL IN THE RED  /USA dollar index DOWN to 93.72/Euro UP to 1.1369

3b Japan 10 year bond yield: RISES  TO -.100%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 107.07

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  51.12  and Brent: 52.09

3f Gold UP  /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 UP for WTI and UP 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 0.055%   German bunds in negative yields from 9 years out

 Greece  sees its 2 year rate FALL to 8.141%/: 

3j Greek 10 year bond yield RISE to  : 7.42%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1253.40/silver $16.78(7:45 am est)  RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 49 in  roubles/dollar) 64.15-

3m oil into the 51 dollar handle for WTI and 52 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 .9628 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0947 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  + .055%

/German 9 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 1.712% early this morning. Thirty year rate  at 2.531% /POLICY ERROR)

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

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

Futures Levitate To Session Highs As ECB Enters The Bond Market; Crude Hits $51

In an overnight session dominated by the latest political developments out of the US where Hillary Clinton officially claimed the democratic nomination, the financial newsflow focused on China’s trade data, where exports fell 4.1% from a year earlier, in line with expectations, but imports dropped 0.4% from a year earlier, the smallest decline since they turned negative in November 2014, likely reflecting higher commodities prices but really driven by “imports” from Hong Kong which rose to $2.48b, the highest since at least 1999; and a 243% y/y surge in dollar term, also a historical high. This means that not only is China’s economy not improving as the “rebound in imports” would suggest, but that instead Chinese trade overinvoicing continues to be used quietly transfer capital out of the country. 

For now however, emerging markets equities and currencies rose for a fifth day, boosted by the “stronger” Chinese trade data, while commodities gained for a sixth day, the longest run in three months, as oil climbed to an eight-month high and metals advanced.  Moments ago, oil rose above $51, climbing 1.4%, to fresh 2016 highs, on the same supply disruption narrative which according to PK  Verleger now accounts for $15 in premium.

The other main news was the official launch of the ECB’s corporate bond buying, which helped drive government bonds yields in German to new record lows, and the average yields on investment-grade corporate debt below 1%. Germany’s 10-year bund yields, already at a record-low, approached zero.  Among the bonds supposedly purchased by the central bank were bonds belonging to Engie, Telefonica, Generali, AB InBev, Siemens, Renault, RWE, and others.  On the back of the ECB’s latest intervention, Germany’s 10-year yield fell to as low as 0.033 percent, the least on record, and was at 0.05 percent as of 10:57 a.m. London time. The yield is likely to test zero as soon as this week, according to the top-ranked primary dealer of the nation’s debt. “The market looks poised to test the level,” said Michael Leister, the Frankfurt-based head of rates strategy at Commerzbank AG. “It can happen over this week. Momentum is quite strong, we’re not that far away from the zero line.”

Meanwhile, the recently dovish Fed is now seen as the catalyst for the next leg higher in stocks: “with global growth moderating, the Fed will be more gradual in its approach to raising interest rates,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital. “That’s going to help boost equities, particularly in emerging markets.” And to think just a week ago it was the hawkish Fed that was boosting equities.

Others disagreed: “markets are generally struggling to find a direction at a time when economic data is not bad, but it’s not great either,” said Michael Hewson, a market analyst at CMC Markets in London. “Ultimately, the global outlook remains pretty weak. The World Bank did not just cut the forecast, it suggested that the risks were tilted to the downside. Now we are getting a little bit of profit taking.”

Judging by futures at session highs as of the moment, the algos don’t really care about the economic data. In fact, global stocks are trading near their highest levels of 2016, having rallied since February as commodities recovered from a quarter-century low to enter into a bull market this week. Government bonds, corporate credit, gold and emerging markets are also rallying, indicating that investors aren’t deterred by a deteriorating U.S. labor market or a cut by the World Bank on its forecast for global growth this year. Central bank stimulus helps explain the moves, with traders adding to bets this week that the Federal Reserve will keep interest rates lower for longer.

“Following the payrolls, clearly the expectations for rate hikes have been scaled back and it gives investors more room to look for more carry,” said Allan von Mehren, chief analyst at Danske Bank A/S in Copenhagen. “Given the weak payrolls and that Fed hikes are probably not going to come this summer — maybe in September but at least for the next couple of months it seems less likely — that’s clearly supporting demand for bonds.”

For now, however, the trade is simple: with the ECB backstopping bond purchases, traders are shifting up and down on the balance sheet, and this morning continue to aggressively buying everything from bonds, to commodities, and most certainly, to stocks.

Market Wrap

  • S&P 500 futures up 0.1% to 2113
  • Stoxx 600 down 0.4% to 345
  • FTSE 100 down less than 0.1% to 6283
  • DAX down 0.5% to 10239
  • German 10Yr yield unchanged at 0.05%
  • Italian 10Yr yield down 3bps to 1.39%
  • Spanish 10Yr yield down 4bps to 1.42%
  • S&P GSCI Index up 0.7% to 385.2
  • MSCI Asia Pacific up 0.5% to 132
  • Nikkei 225 up 0.9% to 16831
  • Hang Seng down 0.1% to 21298
  • Shanghai Composite down 0.3% to 2927
  • S&P/ASX 200 down less than 0.1% to 5370
  • US 10-yr yield down 1bp to 1.71%
  • Dollar Index down 0.07% to 93.77
  • WTI Crude futures up 0.7% to $50.71
  • Brent Futures up 0.9% to $51.90
  • Gold spot up 0.7% to $1,253
  • Silver spot up 2.1% to $16.73

Top Global News

  • Yahoo Offering More Than 3,000 Patents Amid Strategic Reviews: Intellectual property covers search, ads, cloud technology, co. to keep more than 1,000 patents for its core business
  • Clinton Claims Historic Victory as Battle With Trump Opens: Declared herself the victor in the Democratic nominating race
  • VeriFone Cuts Year Adj. EPS, Rev. Views; Shares Fall 23%: Sees FY2016 adj. EPS $1.85, saw $2.21-$2.24 (March 10); sees FY2016 adj. net rev. $2.1b, saw $2.15b-$2.17b
  • Ingenico Leads Payment Companies’ Drop After VeriFone Warns
  • Valeant Walks Knife’s Edge of Debt Limits With Forecast Cut: New Ebitda projects are close to limit of debt agreements; files 10-Q report, avoiding nearest risk of default
  • Ex-LendingClub CEO Laplanche Has Explored Takeover, Reuters Says: Founder said to approach buyout funds, banks on financing
  • Blackstone Said to Be in Advanced Talks to Buy Acrisure: Reuters: Deal could value Acrisure at over $2b incl. debt, Reuters reports, citing unidentified people familiar
  • Hiring Plans Axed Amid Election-Year Uncertainty, U.S. CFOs Say: Almost half of U.S. financial chiefs report pullback in plans
  • Alstom, GE Accused of Decade-Old Bribes by Ex-Petrobras Official: GE denies wrongdoing; Alstom said no longer in energy business
  • IEA Cuts Gas Demand Outlook Again as Glut Seen to End of Decade: Gas use in power generation slows, especially in U.S.
  • Amazon Targets India Growth With $3 Billion Investment Boost: Company employs 45,000 in India, sees ‘huge potential’
  • Musk: Tesla Working Exclusively With Panasonic on Model 3 Cells
  • Gannett May Sweeten $15/Shr Bid for Tribune Publishing: NYP: May only sweeten bid if it looks like it would help close deal, NYP reports, citing unidentified person familiar
  • Youtube CEO Sees Snapchat, Facebook, Netflix as Main Rivals: WSJ
  • GM Canada to Hire Up to 1k Engineers in R&D Push: Globe & Mail

Looking at regional markets, we start in Asia where the Shanghai Composite Index slipped 0.3% while the Hang Seng China Enterprises Index in Hong Kong gained 0.3 percent. Mainland markets will be closed for holidays for the rest of the week, while Hong Kong’s will shut on Thursday. The MSCI Asia Pacific Index rose 0.5 percent, having been 0.1 percent lower before the Chinese trade figures were released. Japan’s Topix and South Korea’s Kospi advanced 0.8 percent, with the latter capping its highest close since November. Japan’s 20-year bonds advanced, pushing their yield as low as 0.205 percent. South Korean bonds rose on a plan to create an 11 trillion won ($9.5 billion) fund to bolster finances at state lenders. The yield on 10-year sovereign securities dropped two basis points to 1.72 percent.

Top Asia News

  • China Exports Stabilize as Imports Hint at Improving Demand: Trade figures look better in yuan terms as currency weakens
  • China May Retail Auto Sales Rise 11.4% on Year: China’s retail auto sales in May rose to 1.76m units, Passenger Car Association says
  • Yuan Fixing Is Back in Focus as Declines Deepen Against Peers: Central bank surprises traders with reference rate this week
  • Japan’s Biggest Bank Considers Exit as Primary JGB Dealer: Move poses questions over BOJ’s negative-rate policy, Iwashita says
  • Apple Raises $1.4 Billion in Taiwan on Larger Insurer Appetite: Canada’s Manulife also sells $1b of bonds in Taiwan
  • Nissan, Takata Face Criminal Complaint on Japan Air-Bag Rupture: Cos. said they were cooperating with investigation
  • 1MDB Defends Liquidity Position After Moody’s Removes Rating: Malaysian fund defaulted on debt in April amid dispute
  • StanChart Said to Mull Asia Non-Life Insurance Distribution Deal: Considering inviting bids from insurers to distribute their non-life products through its hundreds of branches and outlets in Asia, according to people with knowledge of matter

In Europe, the Stoxx Europe 600 Index was an outlier as it retreated 0.5%. Roche Holding AG and Novartis AG were the biggest drags, down at least 1 percent. Travel-and-leisure companies and banks posted the biggest declines of the 19 industry groups on the equity gauge. Erste Group Bank AG lost 3 percent after one of its holders sold a stake in the Austrian lender. Miners bucked the trend, with Glencore Plc leading industry gains as commodity prices advanced. Engie added 2.3 percent after the ECB was said to have purchased 3 million euros ($3.4 million) of the French utility company’s debt. German power producers EON SE and RWE AG also climbed. The ECB made its first purchases of corporate debt, including notes issued by Telefonica SA, power company Engie SA and insurer Assicurazioni Generali SpA, according to people familiar with the matter. The central bank is buying non-bank company debt in euros as part of efforts to revive investment and inflation in the region. Its program has helped drive average yields on investment-grade corporate debt in the single currency to below 1 percent, the lowest in more than a year, according to Bank of America Merrill Lynch index data.

Top European News

  • Draghi Fires Starting Gun on Corporate Bond Purchases in Europe: ECB started buying corporate bonds on Wednesday, according to people familiar with the matter; Engie, Telefonica, Generali bonds among those bought by ECB
  • U.K. Industrial Output Has Biggest Monthly Gain Since 2012: Output rose 2% from March, when it gained 0.3%, economists in a Bloomberg survey had predicted no change
  • Fiat Said in Talks With Uber as Marchionne Seeks Tech Ventures: Cos. said to consider partnership on driverless cars
  • Daimler Trucks Widens Global Parts Sharing to Bolster Earnings: Aims to boost future earnings with a plan to cut costs by sharing engines, axles and other components across units in North America, Europe and Asia
  • Sainsbury Sales Beat Estimates as Price Cuts Stem Decline: Cut prices permanently to stem a loss of customers to cheaper competitors
  • Europe’s Political Anguish Spreads From Spanish to Italian Bonds: Spread between two countries narrows to least since Dec.
  • Brexit TV Special Sees Cameron, Farage Push Core Messages

In FX, the Bloomberg Dollar Spot Index fell 0.1 percent as the yen strengthened
0.3 percent, buoyed by a government report showing Japan’s economy grew
faster last quarter than was initially estimated.
the won strengthened 0.5 percent versus the greenback, after a 1.8 percent surge on Tuesday that marked its biggest jump in six years, while Taiwan’s dollar appreciated 0.3 percent. The countries count China as their No. 1 export market. The MSCI Emerging Markets Currency Index advanced 0.3 percent, poised for the highest close since May 3. Poland’s zloty strengthened 0.2 percent against the euro as the central bank left monetary policy unchanged in Governor Marek Belka’s last meeting before his term ends this month. Gross domestic product expanded by an annualized 1.9 percent, more than a preliminary reading of 1.7 percent.

In commodities, the Bloomberg Commodity Index rose another 0.7% to the highest since October, after entering a bull market on Monday. West Texas Intermediate crude climbed as much as 0.9 percent to $50.81 a barrel. U.S. stockpiles are estimated to have fallen for a third week, a Bloomberg survey showed before official data on Wednesday. Oil has surged about 90 percent from a 12-year low in February amid unexpected disruptions and a continuous slide in U.S. output, which is under pressure from the Organization of Petroleum Exporting Countries’ policy of pumping without limits.  Aluminum rose 2.1 percent on the London Metal Exchange, with zinc, nickel and lead also climbing more than 1 percent. Gold added 0.7 percent, advancing for the third time in four days.

Looking at today’s US calendar, the main release is the JOLTS job opening report for April .

Bulletin Headline Summary From Bloomberg

  • Bonds rose with commodities and emerging markets on speculation that central banks will persist with policies that support financial markets
  • Treasury 10-year notes are in the highest demand in half a century by one measure as investors prepared to bid at a $20 billion sale of the securities today
  • Germany’s 10-year bond yields, already at a record-low, are likely to test zero as soon as this week, according to the top-ranked primary dealer of the nation’s debt
  • Mitsubishi UFJ Financial Group Inc. may quit as one of the 22 primary dealers that underwrite auctions of the nation’s bonds; the bank’s President Nobuyuki Hirano has been among the most vocal critics of the negative-rate policy
  • The European Central Bank entered a new phase in its efforts to stimulate the flagging euro region’s economy, plunging into the corporate bond market for the first time
  • Greek bonds will soon become eligible for the European Central Bank’s asset-purchase program, paving the way for an easing of capital controls, and the gradual recovery of investor confidence, Finance Minister Euclid Tsakalotos said
  • U.K. industrial production posted its biggest monthly gain in almost four years in April as manufacturing surged. Output rose 2% from March, when it gained 0.3%
  • Hillary Clinton declared herself the victor in the Democratic nominating race and

DB’s Jim Reid Concludes the Overnight Wrap

Markets continue to react reasonably well to Friday’s weak payrolls and Yellen’s relatively dovish tone on Monday night. It remains an odd one though as markets recovered their poise in May after the Fed minutes were more hawkish than expected thus repricing the front end and signalling a summer hike. The narrative was that markets welcomed the confidence the Fed had in the economy. However now we’ve gone back almost full circle markets seem to be happy there is no imminent rate rise. It’s not clear which is the correct interpretation but can both be right? I suppose it boils down to the fact that rate rises can be absorbed if the data is firm and expected to stay that way but less so if data is still ambiguous. For now we’re back in the ‘ambiguous but not awful but with no imminent rate rise’ channel.

Employment numbers are going to be closely watched for a break out from this channel and today brings the monthly JOLTS report – a firm Yellen favourite. As our US economists point out, the data that goes into the JOLTS report are derived from the Establishment Survey which is also used to construct nonfarm payrolls. However it’s worth noting that JOLTS is released with a one-month lag, meaning today’s report corresponds to April. Given the downward revision to the April payrolls report (-37k to 123k) as well as a similar revision lower in March, they expect to see mild deterioration in the three series within the JOLTS that the Fed is focused on, namely the job openings, hirings and quits rates. They also note that the diffusion index of private payrolls has declined meaningfully over the past three months. Our colleagues highlight that the percentage of industries hiring over the three months ending in May (53.2%) fell to the lowest level since March 2010 (47.5%) when the economy was just emerging from recession. With this coinciding with the recent weakness in payrolls growth, a soft number today would be more food for thought for the Fed.

Changing tact now and switching straight over to Asia where there have been a couple of important data releases this morning. In China the trade numbers for May have been released a short time ago. The numbers make for slightly disappointing reading however. In USD terms exports have weakened further during the month to -4.1% yoy (vs. -4.0% expected) from -1.8% in April. Meanwhile, imports have declined -0.4% yoy but that’s a lot less than what was expected (-6.8%) and also relative to April (-10.9%). The end result is a trade surplus of $50bn which is about $4.5bn higher than that of April. There was a similar trend for the numbers in CNY terms. Chinese equity markets were already lower prior to the data and have held onto those losses as we go to print. The Shanghai Comp is currently -0.44%.

Meanwhile we’ve also had some data out of Japan where the final Q1 GDP report was revised up one-tenth as expected to +0.5% qoq, or a quarterly annualized rate of +1.9%. Our economists in Japan note that we should treat the data with caution given the potential overestimate due to the leap-year effect.

The Yen was immediately stronger post the data but has pared back a little now, although is still +0.2% firmer as we type. It’s been alot more volatile for Japanese equity markets however where the Nikkei was down as much as -0.50% post the release, only to now have jumped to a +0.55% as we type. Elsewhere, the Hang Seng is -0.33% while the Kospi and ASX are little changed. It’s hard to gauge how much of an effect, if at all, the new World Bank forecasts released late last night have had. The Bank cut its forecast for global growth this year to 2.4% from the initial 2.9% estimate made in January, with growth for 2017 sketched in as 2.7%.

Moving on. Our latest Credit Bite should have hit your inbox yesterday at around 9pm London time. It is called “Nykredit Bite – The First Tier 3 Bond”. The Danish mortgage provider Nykredit has issued a new type of bond that ranks between senior unsecured and subordinated Tier 2 bonds, hence Tier 3, which the authorities can write down or convert to equity in resolution. Eventually, the latest regulatory requirements on loss absorbency are likely to give rise to a new asset class: Tier 3 bonds of European banks. Please see the note for more details.

Staying with credit, today sees the start of DB’s 20th European Leverage Finance conference which is a huge two day event. I’ll be around for most of it so if you’re about please say hello. I’m kicking off day 2 tomorrow over breakfast so please come along to that. Ahead of the conference yesterday we published our latest Euro HY strategy monthly which takes stock of the market (fundamentals, technicals and valuations) ahead of a busy June. Overall valuations look OK but given the EUR HY index has rallied more than 7.5% from the February lows they are not as attractive as they have been. We remain comfortable with our year-end forecasts (tighter) for now but at some point late cycle will turn into a recession so we have to be vigilant. We still think it’s more a 2017 story but the recent payrolls report raises some risks.
Back to markets. As we highlighted earlier the relatively positive performance post-payrolls continued again yesterday. Despite a late slip into the close, the S&P 500 (+0.13%) still closed a touch higher on the day and in the process is creeping closer and closer to breaking that all time record high in the index set in May last year. Markets in Europe had actually closed with more impressive gains earlier in the day (Stoxx 600 +1.12%) with some of the data there helping. It was another decent performance for Oil however which fuelled much of the positive sentiment. Indeed WTI was up +1.35% yesterday and in doing so closed above $50/bbl (at $50.36/bbl) for the first time since July last year. That means it’s now up a fairly remarkable 93% from the intraday February lows with the recent supply disruptions in Nigeria still seemingly driving the recent support.

Also helping is a slightly softer US Dollar despite the post payrolls weakening for the Greenback starting to show signs of fatigue. Some of the more eye catching moves yesterday though came in rates markets and particularly in Europe. Most notable of the bunch was the move in the 10y Bund with the yield closing 3.6bps lower on the day at 0.048% – a new all time record low. With the ‘umlaufrendite’ already in negative territory at -0.01%, the move yesterday for the 10y means it is one step closer to joining Switzerland and Japan in the negative 10y yield camp. There’s still some way to go to matching that of the Swiss though with yields there in negative territory up until the 21y maturity. Remarkable. Bloomberg in fact reported yesterday that 42% of bonds in its Eurozone Sovereign Bond Index have negative yields.
Meanwhile, over in credit markets price action yesterday was relatively subdued although there were plenty of headlines being generated from US HY giant Valeant. Earlier in the day the company again slashed its earnings outlook for this year (the second time it has done so) with the bonds taking another dip lower as a result. The share price also plummeted nearly 15%. Post the close though we then got the announcement from the company that it has filed its delayed 10-Q report and so actually beating a self-imposed deadline. That of course comes after creditors had sent the company notices of default due to the breach. This saga looks set to continue for some time though.

Away from this, the positive takeaway from yesterday’s data flow was largely focused in Europe. In Germany we saw industrial production for April come in a little better than expected during the month (+0.8% mom vs. +0.7% expected) which has helped lift the YoY rate to +1.2% from +0.3%. Meanwhile, the final take of the Q1 GDP report for the Euro area saw growth revised up a tenth from the initial estimate to +0.6% qoq. That has had the effect of keeping the YoY rate unchanged at +1.7%. Meanwhile across the pond yesterday the final Q1 reading for nonfarm productivity was revised up four-tenths to -0.6% qoq, while unit labour costs for the first quarter was also revised up an equal amount to +4.5% qoq. Elsewhere the IBD/TIPP economic optimism came in bang in line with expectations at 48.2, although that was disappointingly down half a point from last month. Finally credit growth was reported as $13.4bn in April (vs. $18.0bn expected) with the gain in revolving credit being the smallest in three months.




i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed DOWN  BY 8.89 PTS OR 0.30% /Hang Sang closed DOWN 30.36 OR 0.14%. The Nikkei closed UP 155.47 POINTS OR 0.93% Australia’s all ordinaires  CLOSED DOWN 0.02% Chinese yuan (ONSHORE) closed DOW at 6.5715 Oil ROSE to 51.12 dollars per barrel for WTI and 52.09 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5771 yuan to the dollar vs 6.5715 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS) 



The following is a major story and will no doubt have implications going forward for the central bank of Japan.  Today we find that Japan’s biggest bank has quit being a primary dealer for sovereign bonds.  The reason for them leaving is simple:  negative interest rates are killing their balance sheet and they see no reason to buy the bonds.  Actually bank levels of owing sovereign bonds have fallen as the Central Bank gobbles up 100% of new issuance;


(courtesy zero hedge)


“It’s A Seismic Shift” – Japan’s Biggest Bank To Quit As JGB Primary Dealer

Ever since the launch of Japan’s QE, and worsening in the aftermath of January’s shocking NIRP announcement, Japan’s bond market, which moments ago slid to new record lows yields across the curve, has had its share of near-death experiences: between repeated VaR shocks, to days in which not a single bond was traded, to trillions in bonds with negative yields, it has seemed that the Japanese Government Bond is on life support. That support may be ending.

According to Nikkei, and confirmed by Bloomberg, Japan’s biggest bank, Bank of Tokyo-Mitsubishi UFJ,is preparing to quit its role as a primary dealer of Japanese government bonds as negative interest rates turn the instruments into larger risks, a fallout from massive monetary easing measures by the Bank of Japan. While the role of a Primary Dealer comes with solid perks such as meetings with the Finance Ministry over bond issuance and generally being privy to inside information and effectively free money under POMO, dealers also are required to bid on at least 4% of a planned JGB issuance, which as the Nikkei reports has become an increasingly heavy burden for BTMU.

In other words, one of the key links that provides liquidity and lubricates the Japanese government bond market has just decided to exit the market due to, among other thinks, lack of liquidity entirely due to the policy failure of Abenomics in general, and Kuroda’s disastrous monetary policies in particular. One could, of course, ask just how does BTMU plan on also exiting the Japanese economy itself, if and when the country’s $8 trillion bond market implodes, but we doubt the bank will ever be able to answer that.

The ministry is expected to let the bank resign.

Japan has 22 primary dealers including megabanks and major brokerages. Several foreign brokerages had pulled out before as part of restructuring efforts at home or for other reasons, but BTMU will be the first Japanese institution to quit. 

In a revolutionary shift, one created by the Bank of Japan itself, banks, once the biggest buyers of JGBs, see little appeal in sovereign debt today. The bonds have very low yields, and a rise in interest rates could leave banks with vast unrealized losses. Private-sector banks held just over 229 trillion yen ($2.13 trillion) in JGBs at the end of 2015, nearly 30% less than at the end of March 2013, before the BOJ launched massive quantitative and qualitative easing measures.

Negative rates introduced this year by the BOJ reinforced the trend. The highest bid yield on benchmark 10-year JGBs sank to a record low of negative 0.092% on Thursday. BTMU was the fifth-largest buyer of Japanese government bonds among the 22 primary dealers until spring 2015, but ranked 10th or lower between October 2015 and March 2016 as shareholders turned up their nose on government debt.

Ironically, the same NIRP that was supposed to save Japan’s economy is now set to kill Japan’s bond market: Japan’s three megabanks halved their JGB holdings to a total of 54 trillion yen in the three years through March. They get little benefit from building up their positions on negative-yield bonds, which result in a loss when held to maturity.

Meanwhile, Peter Pan Kuroda and his merry monetary lunatics, continue continue to crowd out the entire market, purchasing 100% of gross issuance, or a whopping 80 trillion yen in JGBs annually, and last year its holdings surpassed that of commercial banks in 2015 for the first time in about 40 years.

For now, Japan’s increasingly fragile bond market appears stable thanks to the central bank’s massive intervention, however the irony is that the more the BOJ intervenes the more it will have to intervene to sustain the illusion that there even is a bond market. That will not last long, and now that the Primary Dealer exodus has begun, what little liquidity there was in JGBs will evaporate completely.

For now, few expect immediate turmoil from BTMU ceasing to be a primary dealer. But a drop in private-sector interest could undercut the market in the medium to long term. Actually replace “could” with “will.”

Analysts, while slow to pick up on the news, are waking up to a changed world for the world’s second largest government bond market. According to Chotaro Morita, chief rates strategist at SMBC Nikko Securities, news that Japan’s largest banks may return its primary-dealer license signals a “seismic change” in Japan’s govt bond market, initially triggered by BOJ’s QQE.

Trying to downplay the impact of this shocking move, Morita said that the short-term impact on JGB market may be limited given BOJ’s purchases, however he adds that “if other large banks follow this move, it’s hard to say there will be no impact.”

According to the Nikkei that’s precisely what is about to happen: Sumitomo Mitsui Financial Group and Mizuho Financial Group also may consider quitting like BTMU.

As a reminder, according to the BIS, Japan had a little over $8 trillion in government debt as of 2015.



The rhetoric between China and the USA grows louder by the day.  China now states that a USA plane entered South China Seas again and close to China’s air space.  China sent up two planes to intercept the USA plane.  China states that the USA is deliberating hyping up the situation.

I think China will send a message to the USA in the form of a run on gold and silver at the comex

( zerohedge)

China Says The US “Deliberately Hyping Up” Latest Spy Plane Intercept

In what is becoming a routine event, a US Air Force RC-135 reconnaissance plane was again intercepted by two Chinese J-10 fighter planes during a routine patrol in international airspace over the East China Sea on Tuesday, the US Pacific Command said.

Stock photo of a RC-135U

The US is saying that the intercept was done in an unsafe manner – “One of the intercepting Chinese jets had an unsafe excessive rate of closure on the RC-135 aircraft. Initial assessment is that this seems to be a case of improper airmanship, as no other provocative or unsafe maneuvers occurred” Pacific Command said, without saying how close the Chinese fighter came to the US plane. One official told CNN that the jet was never closer than 100 feet however.

“The Department of Defense is addressing the issue with China in appropriate diplomatic and military channels” the Pacific Command statement added.

China’s Defense Ministry said that it had noted the report and was looking into it. Additionally, China’s Defense Ministry told Reutersjudging by the report, the US side is again deliberately hyping up the issue of the close surveillance of China by US military aircraft. Chinese military pilots consistently carry out operations in accordance with the law and the rules, and are professional and responsible.”

China’s Ministry of Foreign Affairs had a much more harsh point of view on the subject however…

Frequent close-up surveillance activities by US military threaten China’s air and maritime safety.” Ministry of Foreign Affairs spokesman Hong Lei said according to Bloomberg.

Hong also added that “China has the right to take defensive measures”, and when asked if the incident had been timed to coincide with the high-level China-US talks in Beijing, Hong respondedAsk the Americans.

The intercept comes just days after US Defense Secretary Ash carter and other top military officials attended a security meeting in Singapore, during which Carter said that China was building a “Great Wall of self-isolation” due to China’s activities in the South China Sea, as well as reminding China that US intends to remain the main underwriter of security in the region. Carter reinforced that nothing would deter “America’s determination to, and resolve to, fly, sail, or operate wherever international law allows.” – something that has already led China to brand the US as being “The greatest threat to peace and stability

With the US flat out stating that it wouldn’t withdraw from the region due to the trillions in trade that passes through the South China Sea, we expect to continue to see more of these games being played between the two nations.

Chinese oil imports drop to 4 month lows.  A good indicator that their economy is slowing and thus the global economy is slowing down.
(courtesy zero hedge)

China Oil Imports Drop To Four Month Low As Demand Is Expected To “Moderate Significantly” In 2016

One of the bright spots of demand for oil in recent months has been China, where teapot refineries have been firing on all fours following the recent loosening of import restrictions, leading to a buying scramble of offshore oil (courtesy of the recent massive credit injection by the PBOC) which among other things has resulted in an unprecedented glut of gasoline.  That is no longer the case.

According to Bloomberg, oil imports by China, the world’s biggest consumer after the U.S., fell to a four-month low in part due to congestion at one of its biggest ports curbed purchases from independent refiners. Inbound shipments in May totaled 32.24 million metric tons, data from the Beijing-based General Administration of Customs showed on Wednesday. That’s equivalent to 7.62 million barrels a day , down 4.3 percent from the previous month, and the lowest since January. Net oil-product exports fell by almost one-third from April to 810,000 tons.

This validates what we noted two months ago when we looked at the unprecedented glut of full tankers lying in wait in places like the Persian Gulf and the Straits of Malacca, waiting for higher prices to make landfall. As we noted then, “It’s not just the Persian Gulf though: shocking sights can be seen in in Asia, where many ports have not been upgraded in time to deal with ravenous demand as consumers take advantage of cheap fuel. “It’s the worst I’ve seen at Qingdao,” said a tanker captain waiting to offload at the world’s seventh busiest port, adding that his crew was killing time doing maintenance work. ”

This has now been confirmed.

According to Bloomberg,  “Qingdao port in Shandong province, where most teapots are based, has been congested this year from “unprecedented” tanker traffic, according to Liu Jin, general manager of Qingdao Shihua Crude Oil Terminal Co., which operates oil berths at the port.”

“The congestion at the Qingdao port is highlighting the need to slow the pace of buying,” Michal Meidan, an Asia energy analyst at Energy Aspects Ltd., said by e-mail. “Prices have gone up, so teapots will use this to take stock of their buying patterns thus far.”

It wasn’t just congestion however. As UPI notes, oil demand in China, a leading global economy, contracted for the third straight month in part because of economic slowdown, data analysis found. “Analysts with the World Bank downgraded the forecast for global economic growth for the year from 2.9 percent to 2.4 percent. India’s economy grows by 7.6 percent, while Brazil and Russia sink deeper into recession. For China, the World Bank said the economy expands this year by 6.7 percent, compared with 6.9 percent last year. “In an environment of anemic growth, the global economy faces mounting risks, including a further slowdown in major emerging markets,” the World Bank said.”

It gets worse; according to an analysis from S&P Global Platts finds China’s apparent oil demand, a measure of domestic production plus net imports, shrank 1.3 percent year-on-year in April. “China’s oil demand growth is expected to moderate significantly in 2016 as gross domestic product growth slows on the back of economic rebalancing,” the emailed report found.

Ignoring the question of macro growth and focusing on just local refineries, Bloomberg adds that China’s refineries processed a record 44.75 million tons of crude in April, while output from its domestic fields slumped to the lowest in 14 months, data from the National Bureau of Statistics showed last month. Total exports fell 4.1 percent in dollar terms in May from a year earlier, the customs administration said Wednesday.

However, as we also showed before, it may not be just port congestion.  As we showed last week, Chinese gasoline exports are also up more than 50 percent for the first four months of the year, suggesting there is nowhere near enough local demand for all the refined product.


As a result Reuters said that going forward China could scale back its volumes. “Maintenance in May and June, particularly at (Chinese) teapot refiners will … lower gasoline output,” analysts at BMI Research said in a note to clients this week.

What this means is that now that China is fully glutted with both raw and refined product, expect Chinese demand to suddenly drop, something which the latest import data are already showing. Unless of course, the government decides to ram refinery production, and alongside the coal and steel industry, to force the production of gasoline well above implied demand, something which as the chart above shows is already taking place.

Assuming some production rationality, however, especially if oil prices continue to rise, and should the supply disruptions get resolved (especially the ongoing situation in Nigeria where the Niger Delta Avengers continue to impair production on a daily basis virtually and mysteriously unopposed), the market is setting itself up for another rerun of the summer of 2015, when prices rose and flatlined for most of the summer, only to tumble into the end of the year.



We now witness the growth in euro skeptic parties that wish to leave the Euro.

The 4 star party of Italy headed by Grillo now has the support of the majority in Italy as 48% of citizens want to leave the Euro.Economics is playing a major role here as unemployment in the south of Italy is extremely high.

We have been detailing problems that citizens have in France and England.

However the bigger threat to the European union would be a German-exit. Germany has a a major problem in that it is the major creditor of Europe through target 2 balances and many of individual sovereign European bills have not been paid like Greece.  Because the Euro is weak, Germany has been the net winner as it can export cheaply to China and the USA at the expense of other nations. However the threat in Germany is whether the ECB and the target 2 balances go bust and cannot be paid and thus Germany leaves the EU


(courtesy John Mauldin)


Germany May Be A Bigger Threat To The European Union Than Brexit

Submitted by John Mauldin via MauldinEconomics.com,

Two polls were recently released that call the European Union in question.

A poll in Italy reported that the Five Star Movement (a populist political party that wants to hold a referendum on whether Italy should remain in the European Union) was the most popular political party in the country ahead of local elections scheduled for next month. 

On the same day, British researchers who surveyed nine EU countries reported that 45 percent of respondents believed that their country should hold a referendum on whether to remain in the EU.

48% of Italians want to leave the EU 

Reuters tried to explain that political scandals, which have undermined public confidence in current Prime Minister Matteo Renzi’s Democratic Party, affected the poll numbers. But this is Italy we’re talking about, the same country that brought us Silvio Berlusconi.

The country is no stranger to political scandals. A few instances of corruption would not be enough to make an anti-establishment party like the Five Star Movement as popular as it has apparently become.

The problem in Italy is economic. Unemployment in at least four of Italy’s southern provinces is over 18.8 percent, and in the other southern provinces, it is between 12 percent and 18.7 percent. And Italy hasn’t yet solved its non-performing loan problem.

Two simultaneous phenomena are occurring here. The first is disillusionment with the Italian government. What was an economic problem has become a political problem, and since Italy is a democracy, its leaders can be voted out of office. The next general election is not until 2018, but if developments continue to unfold in Italy, the situation is only going to get worse for mainstream political parties.

The second, deeper question is whether Italy wants to stay in the European Union. A Euroskeptic party is becoming the most popular political party in the eurozone’s third-largest economy. The rise of euroskepticism manifests itself in the polls, too—58 percent of Italians wanted a referendum on EU membership, and 48 percent would have voted to leave the EU.

In France, one of the twin pillars of the EU, 55 percent of survey respondents agreed a referendum should be called, and 41 percent said they would vote to leave.

Brexit debate adds fuel to the fire

Most debates over Brexit have revolved around potential consequences for Britain—whether Scotland might push for another independence referendum and join the EU on its own terms, or whether and how much (in terms of money and jobs) the UK would lose as a result of a decision to exit.

What was less addressed, however, is how Britain’s stand against the EU and the public debate is dividing the rest of Europe. Prime Minister David Cameron negotiated a series of exceptions early this year. Even if the UK remains, it will have a new set of understandings with Brussels, and other countries may follow its lead.

If Britain leaves and doesn’t undergo an apocalyptic depression, poll numbers might begin to trend upward—and they don’t have a long way to go to become the majority in some of the EU’s most influential states.

Germany is a ticking bomb

At the center of the European Union is Germany whose export-dependent economy is gradually falling apart. (Geopolitical Futures, in partnership with Mauldin Economics, has published a detailed study of the German economy. Click here to claim your free copy). 

The German economy has thus far been able to avoid the crisis of the exporters that has affected every other major exporting country in the world – from the producers of manufactured goods like China and South Korea to commodity exporters like Russia and Saudi Arabia.

The US Treasury Department recently announced that the US would monitor China, Japan, Korea, Taiwan, and Germany for potential currency manipulation. The report noted that Germany has built up a significant bilateral trade surplus with the US, in addition to holding the second-largest current account surplus in the world, at approximately 8.3 percent of GDP.

It isn’t currency manipulation that has put Germany on this monitoring list. It is the fact that European and Chinese demand for German products has fallen. As a result, the US has become thedestination for Germany’s exports in order to make up the difference. Export to the US, however, is a Band-Aid on a deeper wound.

There are a number of factors besides exports that go into Germany’s current account surplus.Germany has become a significant creditor. Its net foreign assets rose from almost zero in the 1990s to around 40 percent of GDP by the end of 2010, according to economic scholar Jörg Bibow.

Interest rates are low, and German banks are viewed as a safe haven in the European Union for stashing money. But since Germany is a creditor, many of the assets on German books are the unpaid debts of other eurozone countries. That means Germany is deeply exposed to a eurozone that still has not meaningfully recovered from the 2008 crisis.

Account surplus is usually seen as a positive. But if Germany has a surplus of 8.3 percent of GDP, why not use that surplus to stimulate domestic demand? Germany must be either unwilling or unable to use the surplus to stimulate domestic demand. This is in part because Germany is a creditor and invests abroad and in its own banks and companies.

And this gets at the root of the entire problem. Germany exports almost half of its GDP. Germany imposed austerity on the EU after 2008, which has resulted in stratospherically high unemployment rates in southern Europe. 

Demand has not returned to pre-financial crisis levels. Germany has been able to skirt the crisis while most of Europe is either still suffering or is in the doldrums. There are limits to US demand and its tolerance of German exports. 

All of this offers different unique prisms through which to see how the European Union’s connective tissue is fraying as the bloc’s economic logic becomes increasingly illogical.

Germany is the powerhouse of the EU and the fourth-largest economy in the world. But the truth is, the Germans are facing a profound crisis – and there’s no way they can prevent it.

In March we reported that Munich Re the huge German insurance giant was buying gold and were hoarding cash in order to avoid the “fees” to the ECB as part of the negative interest rate policy.  Now we see another NIRP blowback: the German bank, Commerzbank is also planning to hoard billions of paper Euro notes in vaults in order to avoid the ECB fees..  However the German bank must pay for fire insurance in case billions of notes are put up in flames.  What a complete joke!
(courtesy zero hedge)

NIRP Blowback: Commerzbank Plans To Hoard Billions In Euros In Vaults, Avoid ECB

As The ECB threatens deeper and deeper NIRP, because that’s what the ‘economy’ needs, it seems unintended (though entirely foreseeable) consequences abound. Just three months after Munich Re – the world second-largest reinsurer – started buying gold and hoarding cash to counter negative rates, in order to avoid The ECB’s increasing ‘fees’ for depositing cash with the central banks, Reuters reports that Commerzbank – one of Germany’s largest lenders – is mulling the possibility of hoarding billions of euros in vaults.

Although no decision has yet been taken, the lender has held discussions on the matter with German authorities, said two officials, who asked not to be named because of the sensitivity of the matter. As Reuters reports, a spokesman for Commerzbank said it was not storing cash “at the moment” and declined to comment on whether it might do so in the future, and The ECB declined to comment…

Commerzbank’s examination of storage alternatives to the ECB comes at a time of growing frustration among European lenders with the ECB charge on deposits.


Were it to store cash on a significant scale, it would become the first major European bank to take such a step. If other lenders were to follow suit, it could render the ECB penalty charge policy increasingly ineffective.


The ECB imposes a so-called negative rate equivalent to 4 euros annually on each 1,000 euros ($1,137) lenders deposit with the central bank. This is designed to encourage banks to lend money, rather than park it.


But some banks complain that a dim global economic outlook means there is weak demand for loans on the terms they require, and they have little option but to hoard cash.


Last month, Commerzbank said that the ECB charge had eaten away at its earnings. The German government owns a stake of almost 16 percent in the Frankfurt-based bank, following a bailout during the financial crash.


German Finance Minister Schaeuble said in April that the ECB’s record low interest rates were causing “extraordinary problems” for German banks and pensioners and risked fuelling the rise of euroscepticism in Germany, where voters had flocked to the right-wing Alternative for Germany in state elections.


As the ECB has pumped more than 1 trillion euros of fresh money into the system – most of which has flowed towards countries such as prosperous Germany – banks have been hoarding ever more with the central bank.


Deposits by European banks at the ECB now stand at more than 850 billion euros, at a considerable cost to banks. Demand for loans in the euro zone, where the economy remains in the doldrums in some quarters, has not spiked despite the ECB measures.

There is no limit on how much cash a bank can hold itself.

Such a move is, however, not without costs, such as insurance against fire or theft. German insurer Ergo and other large European insurers say they have received an increasing number of inquiries from banks examining such a move. It also imposes a logistical challenge that ultimately puts a ceiling on the amount of cash that can be stored. Storing 2 billion euros in 200 euro notes would result in a cash pile that weighed roughly 11 tonnes. The cost of moving such large sums in secure transport ultimately prompted Germany’s regional savings banks to decide against storing cash.

So, to sum up, it would appear that a policy designed to encourage banks to lend money is instead forcing them to hoard it…

And, as we noted previously, “This may well become a mass phenomenon once interest rates are low enough — the only question will be where that exact point is,” said Christoph Kaserer, a professor of finance at the Technische Universitaet in Munich. “For large institutions, that may be the case sooner rather than later. The ECB will react with countermeasures, such as limiting cash.”

As Bloomberg adds, Munich Re’s strategy, if followed by others, could undermine the ECB’s policy of imposing a sub-zero deposit rate to push down market credit costs and spur lending. Cash hoarding threatens to disrupt the transmission of that policy to the real economy.

Munich Re, which oversees a total of 231 billion euros in investments, wants to test how practical it would be to store banknotes, having already kept some of its gold in vaults, von Bomhard said. This comes at a time when consumers are increasingly using credit cards and electronic banking to pay for transactions. Deutsche Bank AG Chief Executive Officer John Cryan has predicted the disappearance of physical cash within a decade.


“This shows the difficulties that the ECB is facing in its efforts to stimulate the real economy,” said Andreas Oehler, a professor of finance at Bamberg University in Bavaria. “Charging negative rates on overnight liquidity doesn’t stimulate longer-term lending. All it does is make companies’ and institutions’ payment transactions more expensive.”

Incidentally, once the Fed’s infatuation with playing central planning doctor fizzles as the economy relapses into an accelerating downward spiral, negative rates are coming to the US next, as such the real-time experiments of how to evade a repressive monetary regime such as those conducted by the Munich Re CEO and now Commerzbank’s management will be particularly useful to those who want to protect their assets once NIRP crosses the Atlantic.

Extremely important:
today the ECB is buying corporate bonds.  They are already buying 2.5 x the issuance of government bonds.  The yields on corporate debt, investment grade are trading at less than 1%, as the ECB sets on buying 5 billion euros worth of corporate per month. The pundits believe that they will not be able to purchase that quantity for long
(courtesy zero hedge)

Next Banking Scandal Explodes in Spain

By Don Quijones, Spain & Mexico, editor at Wolf Street.

Next Banking Scandal Explodes in Spain

The last five years have been a bumper period for banking scams and scandals in crisis-ridden Spain. From Bankia’s doomed IPO in 2012 to the “misselling” of complex preferentes shares to “unsophisticated” retail bank customers, including children and Alzheimers sufferers, all of the scandals have had one thing in common: the banks have consistently and ruthlessly sacrificed the welfare and wealth of customers, investors, and taxpayers on the altar of short-term survival.

Some commentators claim that the problem of banking instability in Spain has been put to rest in recent times, thanks chiefly to a robust, debt-fueled recovery, a tepid resurgence of the real estate sector and the transfer of the most toxic assets from banks’ balance sheets to the festering balance sheets of the nation’s bad bank, Sareb. They could not be more wrong.

Despite the untold billions of euros of public funds lavished on “cleaning up” their balance sheets and the roughly €240 billion of provisions booked against bad debt since December 2007, the banks are just as weak and disaster-prone as they were four years ago.

And now, it seems a new scandal is in the works. Last month Spain’s sixth largest financial institution, Banco Popular, announced that it was urgently seeking to raise €2.5 billion in capital in a desperate bid to shore up its finances. The news triggered a sell-off that wiped out 33% of the bank’s market capitalization in just two days, before investor nerves were steadied somewhat by revelations that the bank had found 10 global mega banks as underwriters for its €2.5 billion rights issue, including Goldman Sachs, Morgan Stanley, Santander, Deutsche Bank and HSBC.

But in recent days the stock has once again begun to crumble following allegations that Popular is also doing some creative selling of its own. The Spanish investment group Blackbird claims that the bank is offering customers dirt-cheap loans or refinancing deals, at an interest rate of just 2.5%, as long as they use some of the funds to purchase the bank’s new shares.

“Popular is offering loans to its customers on the condition that they subscribe to the rights issue… and then deposit the €1.25 per share in their bank accounts,” asserts Marc Ribes, co-founder of BlackBird.

If Blackbird’s allegations are well-founded — and so far there’s been no official denial — Popular is in the process of taking the dark art of banking misdeeds to a whole new level. In the preferentes scandal, Spanish banks effectively plundered billions of euros of their customers’ savings to keep their balance sheets in tact, at least for a little while longer. That was bad enough. But now it seems that the already heavily debt-laden, loss-leading Popular is creating new debt for broke customers so that they can participate in the bank’s rights issue.

Such behavior is not just unethical; it’s illegal. Banks cannot lend customers money to buy the banks’ own shares. At least not in Spain.

The allegations against Popular have reached such a level that Elvira Rodríguez, president of Spain’s National Securities Market Commission (CNMV), was yesterday asked to comment on them. She declared that the CNMV “will be monitoring and asking for information from” Banco Popular about its forthcoming capital expansion. This should, in an ideal world, be a source of relief to investors. But this is not an ideal world and there is no source of relief — at least not from financial regulators, whose role is to guard the foxes as they eat the hens while telling the hens not to worry about the foxes.

In the last five years Spanish banks have been able to bend or break just about every rule in the book with not so much as a slap on the wrist from Spain’s two biggest financial regulators, the CNMV and Banco de España, both of whom have been accused of a raft of oversight failures in Bankia’s IPO.

The chances of the same two regulators suddenly taking an interest in the misdeeds of one of Spain’s biggest financial institutions are paper-thin. As for Spain’s caretaker government, it’s not hard to fathom where its loyalties lie, particularly in light of the fact that the governing People’s Party just received a €1.2 million loan from Banco Popular so that it could post bail for three former treasurers accused of operating a multi-decade slush fund to channel corporate kickbacks to senior party officials.

Meanwhile, Spain’s fourth biggest party, the center-right Cuidadanos financed its last election campaign with a €4 million loan from (yes, you guessed it…) Banco Popular.

With 10 of the world’s biggest and most deviant banks preparing the ground for Popular’s capital expansion while Spain’s regulators and government look the other way, it’s hard to shake the feeling that a trap is being laid. If the last five years are any indication, the chosen prey will be (in order of appearance) gullible customers, retail shareholders, and Spain’s unconsulted taxpayers. Once again, the wealth of the country will be redistributed from middle-class taxpayers, investors, savers, and pensioners to the executives and creditors of financial institutions.

As a former Barcelona-based banker told me a couple of days ago, “the banking sector — once the foundation of the economic system — is a disgrace; it has lost all sense of purpose, apart from sucking dry what little marrow remains of the productive economy.” By Don Quijones, Raging Bull-Shit

Things have gotten so bad in the Eurozone that even the staunchest eurocrats are beginning to express doubts, even European Parliament Chief Martin Schulz who’d warned over a possible “implosion of the EU.” But now, the eurocrats are not just falling into despondency and despair, they’re beginning to turn on each other.



OIL breaks into the 51 dollar column and oil is now double from its February lows:

(courtesy zero hedge)


Oil Doubles From February Lows

Betweeen Doha hopes (and nopes), Nigerian supply ‘disruptions’ which apparently cannot be stopped (conveniently for many oil producers, equity bulls, and central bank inflation watchers), and non-transitory Chinese ‘demand’, WTI crude has topped $51 this morning – almost doubling off the February lows. While still down YoY, oil prices have recovered to 11-month highs, soothing credit-driven anxiety in markets (even though bankruptcies continue) and enabling hedgers to pile in (crushing the crude curve). With rig counts rising once more (and global GDP being slashed), one questions how sustainable this frothy bounce will be…

A larger than expected inventory draw from API last night sparked the latest impulse


Along with China trade data, sending WTI to 11-month highs…


“The market sentiment is positive; the trend and the momentum points to further gains,” said Carsten Fritsch, commodities analyst at Commerzbank. As Reuters reports, 

Supply disruptions caused by a string of attacks by the Niger Delta Avengers militant group in Nigeria have brought the oil exporter’s production to its lowest level in 20 years.


The group said on Wednesday it had attacked another oil well owned by U.S. oil group Chevron, adding to assaults on oil infrastructure owned by Shell and ENI.


Nigerian Oil Minister Emmanuel Ibe Kachikwu said output had dropped to 1.5-1.6 million barrels per day (bpd), down from 2.2 million at the start of the year.


At the same time, May trade data on Wednesday showed the biggest jump in China’s crude oil imports in more than six years, adding to hopes that the economy of the world’s second-largest oil consumer may be stabilising.


“China’s economic activity is not slowing down as much as expected, which is a support to the market,” said Kaname Gokon at brokerage Okato Shoji.

*  *  *

With all eyes on today’s DOE data with regard production, we will see how long $51 will hold.

Crude Chaos After Inventories Drop But Production Rises Most In 2016

When the machines saw that US crude production rose by the most since Jan 1st, prices plunged back below $51… but the machines didn’t like that, and following last night’s API-reported draw, DOE confirmed the 3rd weekly drop in inventories for overall crude and Cushing (the latter more than expected) which juiced oil prices back higher. However, DOE also showed considerably larger than expected builds in Gasoline and Distillates(biggest in 2 months).


  • Crude -3.56mm (-3mm exp)
  • Cushing -1.3mm (-900k exp)
  • Gasoline +760k (-100k exp)
  • Distillates +270k


  • Crude -3.23mm (-3mm exp)
  • Cushing -1.36mm (-900k exp)
  • Gasoline +1.01mm (-100k exp)
  • Distillates +1.75mm

Third weekly draw in a row for overall crude inventories and Cushing but Distillates and Gasoline surprised with large builds.


Sore more details: while commercial stocks did decline by 3.3MM barrels, this was less than last night’s 3.6MM API drop. This was to be expected as May-July are traditionally a period of aggressive draws in the physical market.


However, it is noteworthy that total crude and product stocks rose +3.2 million bbl last week reversing the prior week -2.7 million bbl decline


Gasoline stocks rose by 1MM, well above the expected 2.0MM draw.


Also notable was the increase in distillate inventory, which rose 1.754MM, far above the -700K expected…

And also notable is that distillate demand for this week was only +0.004 mbpd higher than the lowest level in the past 12 years seen in 2009 at 3.572 mbpd

But most importantly, production rose for the first time in 18 weeks and by the most since Jan 1st:


Have shale companies balanced out already?

Don’t look at the market for the answer where the reaction is pure chaos:


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




USA/CAN 1.2701 DOWN  .0058

Early THIS WEDNESDAY morning in Europe, the Euro ROSE by 13 basis points, trading now WELL above the important 1.08 level FALLING to 1.1359; 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 DOWN BY 8.87 PTS OR 0.30% / Hang Sang CLOSED DOWN 30.36 OR  0.14%   / AUSTRALIA IS LOWER BY 0.020%/ 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 WEDNESDAY morning: closed UP 155.47 OR 0.93% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 30.36 PTS OR 0.14% . ,Shanghai CLOSED DOWN 8,89 OR 0.30%/ Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE GREEN /India’s Sensex IN THE RED

Gold very early morning trading: $1252.75


Early WEDNESDAY morning USA 10 year bond yield: 1.712% !!! PAR in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.531 PAR in basis points from TUESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early WEDNESDAY morning: 93.72 DOWN 14 CENTS from TUESDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers WEDNESDAY MORNING



And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield:  3.08% DOWN 4 in basis points from TUESDAY

JAPANESE BOND YIELD: -0.100% UP 2  in   basis points from TUESDAY

SPANISH 10 YR BOND YIELD:1.43%  DOWN 3 IN basis points from TUESDAY

ITALIAN 10 YR BOND YIELD: 1.39  DOWN 3 IN basis points from TUESDAY

the Italian 10 yr bond yield is trading 4 points lower than Spain.





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


Euro/USA 1.1398 UP .0043 (Euro =UP 43 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 106.90 DOWN .390 (Yen UP 39 basis points )

Great Britain/USA 1.4503 DOWN.0037 ( Pound DOWN 37 basis points/(STILL BREXIT CONCERN)

USA/Canada 1.2711 DOWN 0.0048 (Canadian dollar UP 48 basis points  AS OIL  IS RISING (WTI AT $51.19).


This afternoon, the Euro was UP by 43 basis points to trade at 1.1361

The Yen ROSE to 106.90 for a GAIN of 39 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was DOWN 37 basis points, trading at 1.4503( BREXIT FEARS INCREASE )

The Canadian dollar ROSE by 48 basis points to 1.2711, WITH WTI OIL AT:  $51.43

The USA/Yuan closed at 6.5690 

the 10 yr Japanese bond yield closed at -.105% DOWN  1/3   IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 1  IN basis points from TUESDAY at 1.702% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.511 DOWN 2 in basis points on the day ( HUGE POLICY ERROR)


Your closing USA dollar index, 93.57 DOWN 21 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 WEDNESDAY

London:  CLOSED UP 16.99 OR 0.27%
German Dax :CLOSED DOWN 70.65 OR 0.69%
Paris Cac  CLOSED DOWN 27.13  OR 0.61%
Spain IBEX CLOSED DOWN 63.10 OR 0.71%
Italian MIB: CLOSED DOWN 65.79 OR 0.39%

The Dow was UP 66.77.  points or 0.37%

NASDAQ UP 7.54 points or 0.17%
WTI Oil price; 51.18 at 4:30 pm;

Brent Oil: 52.44




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: 52.70


USA DOLLAR INDEX: 93.61 DOWN 24 cents


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




Very unusual:  USA bond yield on the 10 yr tumbles below 1.70% and the Dow rises?

(courtesy zero hedge)

The Most Bullish Open Yet (as 10Y Yields Tumble Below 1.70%)

For the 6th day in a row, the fact that the US equity market is ‘open’ has been a panic-buying event for “investors” – no matter what the overnight trading activity or news…

Another day, another vertical ramp at the open to tag stops…


Is this what human traders do? Perhaps now that the BTFD no matter what doctrine has been written into the constitution (no matter what fundamentals are doing).

Bonds and FX still are not buying whatever stocks are drinking…


Treasury yields are testing post-payrolls lows wioth 10Y below 1.70% once more – crushing Fed credibility.

The following ought to confuse the Fed even more.  Hirings tumble in the JOLTS latest data despite the fact that job openings are rising to record highs. When the market expands, job openings rise.  When the market contracts, job openings fall.  It will be difficult for the Fed to raise rates if they do not understand what is happening on the labour scene
(courtesy zero hedge)

The Beveridge Confusion: Hiring Tumbles Despite Job Openings Rising To Record High

After last Friday’s disastrous jobs report and concurrent prior revisions, few were expecting any remarkable developments from “Yellen’s favorite labor market indicator”, the BLS’ JOLTS, or Jobs Openings and Labor Turnover Survey, and yet there were two surprises.

First, when it comes to actual job openings, the number rose from a downward revised 5.675MM to 5.788MM, which meant the job opening rate remained flat at 3.9%, even if the actual number of job opening just matched the all time high of last July.

The biggest number of job openings were in the leisure and hospitality services industry, followed by accommodation and food services; retail trade; and education and health services, all the lowest or minimum wage paying jobs. Of note here was that Professional & Business Services openings fell a remarkable 274,000 in April. This may help explain the decline in both April and May temporary help payrolls

And while job openings continued rise, actual hiring slowed down substantially: at 5.092MM new hires in the month of April, this was the lowest since September of 2015. As the chart below, which correlates the 12 month change in NFPs to hires, the labor market may indeed be rolling over.

Netting out separations from hires, showed that net turnover of jobs – traditionally the equivalent series to the BLS’ monthly establishment payrolls data – printed at only 104K, this was the lowest addition since June 2012. We expect next month’s data to be even worse as it declines to match the 38K reported in May job gains.


Finally, all of this is summarized in the latest Beveridge curve below, which shows that something remains structurally broken with the work force as at this level of unemployment, the jobs opening rate should be at least one whole percentage point lower, suggesting wage pressures are building up. It is this slack that is resulting in so much confusion at the Fed, not to mention lack of wage growth.

This is how the BLS explains the above chart:

  • The graph plots the job openings rate against the unemployment rate. This graphical representation is known as
    the Beveridge Curve, named after the British economist William Henry Beveridge (1879-1963). The economy’s
    position on the downward sloping Beveridge Curve reflects the state of the business cycle.
  • During an expansion, the unemployment rate is low and the job openings rate is high. Conversely, during a contraction, the unemployment rate is high and the job openings rate is low. The position of the curve is determined by the efficiency of the labor market. For example, a greater mismatch between available jobs and the unemployed in terms of skills or location would cause the curve to shift outward (up and toward the right).
  • From the start of the most recent recession in December 2007 through the end of 2009, the series trended lower and further to the right as the job openings rate declined and the unemployment rate rose. From 2010 to the present, the series has been trending up and to the left as the job openings rate increased and the unemployment rate decreased.
  • In April 2016, the unemployment rate was 5.0 percent and the job openings rate was 3.9 percent, which is higher than the job openings rate before the most recent recession for the same unemployment rate.

As long as the Fed is intent on hiking rates during the above Beverdige Curve dislocation, it will find it has no choice but to stop and even reverse, until it finds the cause for why the US labor market remains broken.




And the following is going on in DC with respect to the labour scene.  In DC the minimum wage went up from $8.25 to 11.50 per hour a year ago and then today, a new law proclaiming the rate to rise to $15.00 per hour is creating havoc for our employers.  Almost 50% of employers have decided to cut jobs or reduce hours. The CEO of McDonald’s was correct:  by raising the minimum rate , other workers will seek higher rates.  Also the higher rate cuts off thousands of entry level workers.

(courtesy zero hedge)

Half Of Washington DC Employers Have Cut Jobs, Hours Due To Minimum Wage Increases – And It’s Going To Get Worse

As former McDonald’s CEO Ed Rensi so eloquently explained not long ago, raising the minimum wage would wipe out thousands of entry level jobs for those who don’t have very many other options.

Washington, DC is validation of Rensi’s theory. According to a report from the Employment Policies Institute, nearlyhalf of Washington, DC employers said they have either laid off employees or reduced the hours of employees to adapt to the District of Columbia’s minimum wage hikes since 2014.

The District of Columbia has seen the minimum wage increase from $8.25 an hour in 2014 to a rate of $11.50 an hour today, and just yesterday an increase to $15 an hour was approved. The Institute surveyed 100 employers in Washington, DC to understand how they would react to further minimum wage hikes, only to find that in order to cut expenses, they have already started laying off employees and reducing hours in order to accommodate the most recent hikes, let alone deal with a further increase to $15 an hour. To offset the increase to $15, the survey found that another round of price increases, layoffs, and reduction in hours would have to take place – as well as potentially moving businesses out of the District. The survey also concluded, just as Rensi said would happen, employment opportunities for younger, less educated people was disappearing. Given the newly approved increase to $15 an hour, employment opportunities will disappear even faster for this group of workers – not that politicians care a lot about that of course, just as long as the union supports during election time.

From the Washington Free Beacon

“Employers affected by the proposed increase to a $15 minimum wage were asked if they had either reduced the number of employees on their staff, or reduced the hours of current employees, to adapt to recently enacted minimum wage increases,” the report says. “Nearly half of employers surveyed had already taken one of these steps—suggesting that 2014-16 minimum wage increases haven’t been absorbed through higher prices alone.”


According to the report, just over half of the businesses surveyed said they planned to raise prices in order to offset the cost of a minimum wage hike. Thirty-five percent said they would likely reduce staffing levels and 37 percent said they would reduce employees’ hours or reduce the number of hours they were open for business. Thirty-one percent of businesses said they were very likely to hire more skilled workers in the future to offset the higher wage.


One in five businesses said they would move out of the District of Columbia and into Arlington, Virginia where the minimum wage is $7.25 per hour. Sixteen percent of businesses surveyed said they were somewhat likely to close their business if the minimum wage hike were implemented and 6 percent of businesses said they would likely close.


“These results are consistent with the best and most recent published research on the minimum wage,which finds that past increases (at lower proposed wage levels) have reduced employment for younger and less-educated employees,” the report states.


“These proposed laws have encouraged a perception that D.C. is becoming less friendly for businesses,” the report says. “Two-thirds of surveyed businesses agreed with this sentiment, with half strongly agreeing that D.C. is becoming a business-unfriendly city.”

Rensi also made an observation that he suspects the push to raise the minimum wage to $15 an hour might not be that altruistic after all – perhaps it’s to actually help depleted union coffers fill up with dues money. Given the fact that even officials who are signing on to minimum wage increases know that it doesn’t make economic sense, it’s difficult to argue with Rensi’s assertion.



Always colourful, David Morgan is interviewed by Greg Hunter

(courtesy Greg Hunter/David Morgan)


Dire Financial Warnings and Debt Jubilee-David Morgan

David MorganBy Greg Hunter’s USAWatchdog.com

Finance and economy writer David Morgan says there has been a noticeable increase in dire warnings from some of the biggest names in the investing world. Why are the elite sounding the alarm on another financial meltdown?  Morgan says, “One reason is they see it’s rather imminent . . . so, could it be this year?  Absolutely.  I have been kind of right and wrong on this.  I am right about the deterioration in the economy, the money supply and the inability to directly address the problem.  Where you pinpoint it is more difficult.  I said 2015 would be the year that most sleepy Americans would wake up and see the economy isn’t really recovering. . . . I think it’s going to be 2016.”

Morgan goes on to say, “The thing to do for the population at large is to admit the truth and say we can’t pay the debt back. Then you have a default, and the fancy word for that is Jubilee.  Then you say you are going to get 10 cents on the dollar or zero on the dollar.  Then everything that has been mispriced gets repriced by the markets instead of the controllers.  Then you start fresh, and you will have trust and truth in the system. . . . You default and let the chips fall where they may.  That rebuilds capital markets.  It’s truthful and correct but also very painful.  The other way is to never admit the truth and hyper-inflate the currency.”

Regardless of the timing, all the big players agree there is going to be another big economic crash. Morgan thinks the elite are fighting over how the crash is going to take place.  Morgan explains, “There is infighting at the top.  The central banks really don’t know what to do, and they are starting to get agitated at the top of the pyramid. . . . As things start to deteriorate more and more . . . there is an instinctive ability of the human species to preserve what they have.  There is infighting at the top.  These people know this isn’t working, and there may be some really interesting discussions going on behind closed doors about what they really can do.  The answer is they really can’t do much.”

On the U.S debt clock showing gold being priced thousands of dollars more than it is priced in the markets, and also silver priced hundreds of dollars higher, Morgan says, “I think it is $812 silver and gold $7,300. What that is is year-over-year increases in M2 money supply and yielding production of silver and gold in ounces.  Or, you could say it’s the year-over-year production in ounces . . . and it’s an arithmetic problem.  It’s dollars per ounce mined.   As to why they are doing this, I don’t know, but I will take a stab at it. Maybe it is to get this out in the public where few are awake and aware.  It’s obviously showing the gold/silver ratio is out of whack. . . . Both silver and gold are way undervalued.”

In closing, Morgan, who is also an expert in gold and silver, says, “Real wealth is what we can physically touch, and the market is going to reprice all of that. Gold and silver are a small subset of real wealth because that is physical money.  If you look at farmland, skyscrapers, all the roads, all the minerals in the ground, oil and everything else, that’s the real wealth.  What you do in a bond collapse is you reprice everything.”

Join Greg Hunter as he goes One-on-One with David Morgan of The Morgan Report.

(There is much more in the video interview)

After the Interview:

There is free information on TheMorganReport.com. If you want to get a copy of Morgan’s recent book titled “The Silver Manifesto”click here. If you want information on Morgan’s subscription service, click here.



Well that about does it for tonight
I hope to have an abbreviated commentary for you tomorrow
It may come out late in the evening.
all the best

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