June 13/GLD adds 2.37 tonnes of “paper “gold into its inventory/SLV adds 1.664 million oz of “paper” silver into its inventory/gold rises by 11 dollars as BREXIT fears intensify/silver up only 11 cents/Japanese large manufacturing last month a disaster/Fitch lowers credit rating on Japan/Chinese industrial production again disappoints as global growth is stymied/Apple sees weaker demand for its iphone 6/In the USA 50 dead with the worst mass shooting ever/

Good evening Ladies and Gentlemen:

Gold:  $1,284.40 UP $11.0    (comex closing time)

Silver 17.43  UP 11 cents

In the access market 5:15 pm

Gold $1283.90

silver:  17.49

i) the June gold contract is an active contract. Late Friday night we had a good sized  103 notices filed for 10,300 oz to be served upon today.  The total number of notices filed in the first 10 days is enormous at 14,352 for 1,435,200 oz.  (44.64 tonnes)

ii) in silver we had 0 notices filed.  total number of notices served  in the 10 days:  202 for 1,010,000 oz

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 273.20 tonnes for a loss of 30 tonnes over that period


In silver, the total open interest FELL by 63 contracts DOWN to 194,520 DESPITE THE FACT THAT THE PRICE OF SILVER WAS WELL UP by 6 cents with respect to FRIDAY’S trading. In ounces, the OI is still represented by just under 1 BILLION oz i.e. 0.972 BILLION TO BE EXACT or 138% 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 10,675 contracts UP to 526,274 as the price of gold was UP $3.30 with FRIDAY’S trading (at comex closing).


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


We had A HUGE change  in inventory, A DEPOSIT OF 2.37 TONNES into the GLD/Inventory rests at  896.29 tonnes.


We had ANOTHER HUGE ADDITION (DEPOSIT) in inventory into the SLV Inventory/Tonight it rests  at 340.389 million oz. This was a “paper” silver addition.

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 63 contracts DOWN to 194,520 as the price of silver was up by 6 cents with FRIDAY’S trading. The gold open interest ROSE by 10,675 contracts UP to 526,274 as the price of gold was up $3.30 on Friday.

(report Harvey).


2 a) Gold trading overnight Europe, Goldcore

(Mark OByrne/



i)Late  SUNDAY night/ MONDAY morning: Shanghai closed DOWN 94.08 POINTS OR 3.21%/ /Hang Sang closed DOWN 529.54 OR 2.52%. The Nikkei closed DOWN 582.18 POINTS OR 3.51% Australia’s all ordinaires  CLOSED DOWN 0.84% Chinese yuan (ONSHORE) closed DOWN at 6.5865 /Oil FELL to 48.44 dollars per barrel for WTI and 50.01 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5989 yuan to the dollar vs 6.5865 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS 



Fitch lowers the boom on Japan as it cuts its credit outlook to negative:

( zero hedge)



Japanese large manufacturing was a disaster:  down to a reading of -.111 (from .-083)Then came Chinese Industrial Production disappointed meeting expectations of 6.% year over year. Retail sales missed as it rose only 10% from year earlier.  They needed higher!

Also Chinese fixed asset investment rose only 9.6% and many expected higher.

( zero hedge)


i)Over the weekend, a new poll showing a shocking 19 point lead by the BREXIT side against the BREMAIN side. Cabinet Minister Smith did not help when he ponted out England will need 7 new prisons due to the massive increase if migrants heading to the UK.

( zero hedge)


ii)Ambrose Evans Pritchard, of the UK Telegraph explains why he voting for a BREXIT:

( Ambrose Evans Pritchard/UK Telegraph)
iii)The latest recent poll out of Spain sees the Eurosceptic Podemos party gaining ground against the PP party of Rajoy

( Mish Shedlock/Mishtalk)
ivThis does not look good:  the ECB purchased only 340 million of European Corporate Bonds on its first day and some of that was junk rated. They are going to have great difficulty fulfilling their mandate as owners of bonds will refuse to part with their ownership over to the ECB:

( zero hedge)

v)Today Deutsche tumbled some more and even bond buying is not helping. Negative rates are killing the bankers

( zerohedge)

vi)Something is going on here! The Central Bank of Belgium and the ECB shut down Optima Bank in Belgium and beginning bankruptcy proceedings. What is very strange is the complete silence of the media on this.  Together with the emergency funding of Banco Popular there seems to be a lot of smoke and fire


A good indicator for global growth;  Apple 2016 iphone sales are fallling due to lower demand:

( zero hedge)



( zero hedge)

ii)Now rioting and looting in Venezuela are a daily occurrence:

( zero hedge)


i) GATA conference in New Orleans in October

(Chris Powell GATA)

ii)Massive buying by the Chinese, sends Bitcoin above 700 dollars USA.  Whenever we see big devaluations in the yuan you know that here is an exit of USA dollas form China

( zero hedge)

iii)USA coal production collapses to a 35 yr low

( Oil and Gas 360/OilPrice.com)


i)The worst mass shooting in USA history/50 dead and 53 wounded.

( zero hedge)


ii)The Supreme Court of the USA strikes down Puerto Rico’s debt restructuring plan.  it is now up to Congress to bail out Puerto Rico;

(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE to an OI level of 526,274 for a GAIN of 10,274 contracts AS THE PRICE OF GOLD WAS UP $3.30 with respect to FRIDAY’S TRADING. And we should expect another dandy rise in OI TOMORROW with gold’s advance today. WE HAVE ENTERED THE SECOND BIGGEST DELIVERY MONTH OF THE YEAR THAT 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 . HOWEVER WE HAVE MORE THAN MADE UP FOR THE LOSS AS MORE INVESTORS ENTER THE ARENA TO TAKE ON THE CRIMINAL BANKERS. WE HAD ANOTHER GAIN IN JUNE OI TODAY FOR GOLD OZ STANDING IN THIS ACTIVE JUNE CONTRACT.

The FRONT gold contract month of June saw it’s OI fall to 1649 for a loss of 23 contracts. We had 142 notices filed on Friday, so we gained 119 contracts or 11,900 additional oz  WILL  STAND FOR METAL. The next active contract month is July and here we saw it’s OI ROSE by 81 contracts UP to 3053.This may  be troublesome for our bankers as the front July contract month is extremely high for a non active month and it also refuses to shrivel. The next big active contract month is August and here the OI ROSE by 7,955 contracts UP to 383,166. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was GOOD at 228,215. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was fair at 178,930 contracts. The comex is not in backwardation.

Today we had 103 notices filed for 14200 oz in gold.


And now for the wild silver comex results. Silver OI fell by 63 contracts from 194,583 DOWN to 194,520 as the price of silver was up BY 6 cents with FRIDAY’S TRADING. The front month of June saw it’s OI FALL by 0 contracts REMAINING AT 339. We had 0 notices filed yesterday, so we NEITHER GAINED NOR LOST ANY SILVER OUNCES STANDING. The next big delivery month is July and here the OI fell by 5,952 contracts DOWN to 94,437. The volume on the comex today (just comex) came in at 72,272 which IS HUGE. The confirmed volume FRIDAY (comex + globex) was excellent at 66,501. 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 13.
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil  8,162.767oz




Deposits to the Dealer Inventory in oz NIL


Deposits to the Customer Inventory, in oz   5626.25  oz




No of oz served (contracts) today 103 contracts
(10,300 oz)
No of oz to be served (notices) 1546 contracts

154,600 oz

Total monthly oz gold served (contracts) so far this month 14,352 contracts (1,435,200 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  138,336.20OZ

Today we had 0 dealer DEPOSITS


total dealer deposit:  NIL  0z


Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz


Today we had 2 customer deposit:

i) into BRINKS:  4822.500 oz  (100 kilobars)

ii) INTO MANFRA 803.75 OZ  (25 KILOBARS)

Total customer deposits;  85,626.25 OZ  (125 KILOBAS0

Today we had 2 customer withdrawals:

I) OUT OF SCOTIA 3215.000 OZ  (100 KILOBARS)



total customer withdrawals:  8,162.767 oz

Today we had 0 adjustment:


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 103 contracts of which 38 notices was stopped (received) by JPMorgan dealer and 53 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 (14,352) x 100 oz  or 1,435,200 oz , to which we  add the difference between the open interest for the front month of JUNE (1649 CONTRACTS) minus the number of notices served upon today (103) x 100 oz   x 100 oz per contract equals 1,5789,800 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. 
Thus the INITIAL standings for gold for the JUNE. contract month:
No of notices served so far (14,352) x 100 oz  or ounces + {OI for the front month (1649) minus the number of  notices served upon today (103) x 100 oz which equals 1,577,900 oz standing in this   active delivery month of JUNE (49.449 tonnes).
WE  gained 119 contracts or an additional 11,900 oz will not stand for silver.
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 49.449 tonnes of gold standing for JUNE and 51.487 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 + 49.079 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 ; june 10 -.0008  = 66.173 tonnes still standing against 51.04 tonnes available.
 Total dealer inventor 1,655,331.926 tonnes or 51.487 tonnes
Total gold inventory (dealer and customer) =8,783,599.493 or 273.20 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 273.20 tonnes for a loss of 30 tonnes over that period. 
JPMorgan has only 25.70 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 13.2016

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory  1,032,761.980 oz




Deposits to the Dealer Inventory NIL
Deposits to the Customer Inventory   1,277,387.342  oz

JPM, Scotia

No of oz served today (contracts) 0 CONTRACTS 

nil OZ

No of oz to be served (notices) 339 contracts

1,695,000 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  16,266,436.8 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 2 customer deposit:

i) Into JPM: 599,905.400 oz

ii) Into Scotia:  677,481.942 oz


Total customer deposits:1,277,387.342 oz.

We had 3 customer withdrawals

i) Out of Scotia:60,432.64  oz

ii) Out of Delaware:  359,355.110 oz

iii) Out of Brinks; 612,974.230 oz



total customer withdrawals:  1,032,761.98 oz




 we had 0 adjustment


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 (339) 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 +{339 OI for front month of JUNE ) -number of notices served upon today (0)x 5000 oz  equals  2,705,000 of silver standing for the JUNE contract month.
We neither lost nor gained any silver ounces standing today.
Total dealer silver:  22.482 million  (RECORD LOW INVENTORY)
Total number of dealer and customer silver:   151.044 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 10/a huge “paper” deposit of 6.54 tonnes of gold into the GLD/Inventory rests at 893.92 tonnes
JUNE 9. a huge deposit of 6.23 tonnes of gold into the GLD/Inventory rests at 887.38 tones
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 13.:  inventory rests tonight at 896.29 tonnes


Now the SLV Inventory
June 10/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz
JUNE 9/no change in silver inventory at the SLV/Inventory rests at 338.725 million oz.
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 13.2016: Inventory 340.389 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 2.5 percent to NAV usa funds and Negative 2.7% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.2%
Percentage of fund in silver:37.4%
cash .+1.4%( June 13/2016). /
2. Sprott silver fund (PSLV): Premium FALLS  to -0.22%!!!! NAV (June 13.2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO +1.99% to NAV  ( June 13.2016)
Note: Sprott silver trust back  into NEGATIVE territory at -22% /Sprott physical gold trust is back into positive territory at +1.99%/Central fund of Canada’s is still in jail.


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

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


Gold In Sterling Up 1.7% On BREXIT Jitters – Surges 10% In June

Gold in sterling has risen another 1.7% today due to deepening BREXIT jitters with just 10 days left until the referendum on June 23. The flight to gold and sell off in sterling came as Asian and European stock markets fell and European equities headed for their lowest close since February.

Gold in sterling has risen from £892.50/oz to £908/o today and is up 10% in the first 9 trading days of June, from £827 to £908/oz, as investors diversify into safe haven gold due to concerns Britain will vote to leave the European Union.


A series of BREXIT opinion polls over the weekend strongly suggested Britain could vote to leave the EU, which many fear will likely lead to a fresh wave of turmoil across markets internationally and heightens the real risk of thebreak up of the European Union.

Sterling weakened against all of its 16 major peers after polls showed the referendum on whether Britain will stay in the EU may see a BREXIT outcome. The pound fell to an eight week low against the dollar and a three year low against the yen as jittery investors shifted into perceived safer fiat currencies.

The Stoxx Europe 600 Index dropped 1.5 percent, the FTSE was down 0.8%, the DAX 1.2% and the CAC 1.4%.

Stock markets in Japan dived to a two- month low, with the benchmark Nikkei 225 index slumping 3.5pc. In Hong Kong, the Hang Seng Index fell 2.54pc, while in China, the Shanghai Composite lost 0.78pc and the Shenzhen Index fell 1.1pc.

S&P 500 futures fell 0.5 percent, indicating U.S. equities will extend declines after Friday dropping the most in three weeks amid concern over tepid growth and potential further market turbulence.

The mass shooting in Orlando and deepening concerns about terrorism will not help market sentiment and will support gold. Deepening social and geopolitical tensions in the United States and the most uncertain political outlook for many years are also contributing to demand for gold.

A Brexit vote on June 23 could see gold prices quickly surge to $1,400, analysts at Capital Economics Ltd. said in a report on Friday.



GATA conference in October

(courtesy Chris Powell/GATA)


Join GATA at the New Orleans conference in October


6:35p ET Sunday, June 12, 2016

Dear Friend of GATA and Gold:

Maybe the only thing better than gold and silver breaking the chains of price suppression by governments would be their doing so during the New Orleans Investment Conference, which will be held this year from Wednesday to Saturday, October 26-29.

Once again GATA Chairman Bill Murphy and your secretary/treasurer will be speakers. We’ll be joined by, among others, newsletter writers Brien Lundin (the conference organizer), Mary Anne and Pamela Aden, Thom Calandra, Dennis Gartman, and Mark Skousen, as well as fund managers Rick Rule and Peter Schiff and Casey Research founder Doug Casey.

Of course New Orleans itself is always one of the stars of the show. The conference again will be held at the Hilton New Orleans Riverside hotel, on the Riverwalk along the Mississippi, across the street from Harrah’s casino, adjacent to the city’s trolley line, and a short walk from the French Quarter, beautiful Jackson Square, and many wonderful restaurants and museums.

The conference schedule is still being developed and we’ll report more about it soon. But you can learn more about it here:


CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.




Massive buying by the Chinese, sends Bitcoin above 700 dollars USA.  Whenever we see big devaluations in the yuan you know that here is an exit of USA dollas form China


(courtesy zero hedge)

Bitcoin Soars Above $700 As Chinese Buying Shows No Signs Of Slowing

When we predicted last September that bitcoin, which then was trading at $230, would be the biggest winner from unprecedented Chinese buying to avoid heightened capital controls, something which even Bloomberg confirms is taking place flip-flopping on its previous “explanation” that BTC is rising due to some Russian pyramid scheme, not even we anticipated a move quite like this: 9 months later bitcoin is over 200% higher, and moments ago soared above $700, hitting $710 earlier today for the first time since early 2014, when it was sliding from its all time high above $1000.


As we wrote over the weekend, the catalyst has been another unprecedented bout of Chinese buying, which started on Saturday evening ET (Sunday morning Chinese time). This is again confirmed by looking at the action in the primary Chinese bitcoin exchange, OKCoin, where the buying, and volume, has been relentless, both on Saturdayand Sunday, when the BIS appears to be away from the “emergency intervention” desk.


While regular readers know the story, here is Bloomberg’s with its “new” narrative: China.

Bitcoin’s rebound is coinciding with weakness in the yuan, which fell the most in two months on Monday in Shanghai. Losses have accelerated in recent weeks as the dollar strengthened and China’s economic outlook deteriorated. Data Monday showed industrial output rose 6 percent in May from a year earlier, while fixed-asset investment increased 9.6 percent in the first five months of 2016, missing all 38 economist forecasts.


“What we’ve seen over the weekend is more of the same: Chinese fear of a slowing economy and the yuan potentially looking to make another move lower,” said Ryan Rabaglia, head of wholesale product management at ANX International in Hong Kong. “Each time we see yuan weakening we tend to see a triggering of capital outflows out of China, and bitcoin has been on the winning end of that.”


The yuan is trading near the five-year low it touched in January, while the Shanghai Composite Index is this year’s worst performer among 93 global stock measures. Goldman Sachs Group Inc. warned this month that the yuan weakness may trigger capital outflows and increase bets on a one-off devaluation.

Recall what we said in September:

We would not be surprised to see another push higher in the value of bitcoin: it was earlier this summer when the digital currency, which can bypass capital controls and national borders with the click of a button, surged on Grexit concerns and fears a Drachma return would crush the savings of an entire nation. Since then, BTC has dropped (in no small part as a result of the previously documented “forking” with Bitcoin XT), however if a few hundred million Chinese decide that the time has come to use bitcoin as the capital controls bypassing currency of choice, and decide to invest even a tiny fraction of the $22 trillion in Chinese deposits in bitcoin (whose total market cap at last check was just over $3 billion), sit back and watch as we witness the second coming of the bitcoin bubble,one which could make the previous all time highs in the digital currency, seems like a low print. 

And just in case China, with its $30 trillion in troubled deposits and soaring capital flight is not enough, another, far less relevant catalyst, is the so called “halving” set to be unveiled in bitcoin in under a month. As a result, profits from mining bitcoins will be reduced in July, a process that’s written into the code to limit supply, according to Chinese exchanges OKCoin and Huobi.

“The halving of the supply of Bitcoin is attracting many retail investors,” Liu said. “More broadly, we continue to see follow-through from the blockchain hype cycle translating to interest in bitcoin the asset.”

But the real story here remains the momentum: it is well-known that habitual Chinese gamblers like nothing more than buying high any asset that has upside momentum (most recently observed in the “rebar” bubble of April), the reality is that nobody knows how far BTC can rise from this point on. The math is favorable: bitcoin still has a market cap of only $10 billion compared to total Chinese financial deposits of over $22 trillion.

Bottom line: it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make sure their cost basis is zero going forward.

USA coal production collapses to a 35 yr low
(courtesy OIl and Gas 360/OilPrice.com)

Coal Production Collapses To 35-Year Low

Submitted by Oil & Gas 360 via OilPrice.com,

Coal production in the first three months of 2016 was 173 million short tons, the lowest quarterly level in the United States since a major coal strike in the second quarter of 1981. Among the regions tracked by the EIA, the Powder River Basin (PBR) in Montana and Wyoming saw the largest decline both in terms of absolute tonnage and as a percentage of the previous quarter.

Demand for coal has dropped off steeply as natural gas becomes the primary fuel source for electrical generation. Electricity generation accounts for more than 90 percent of domestic coal use, but environmental regulations have caused the fuel source to fall out of favor. Compounding the problem for coal producers, electricity demand is growing more slowly, while historically-low natural gas prices are making it easier for electricity generators to switch to the cleaner burning fuel, reports the EIA.

A 17 percent decrease in coal production from the previous quarter marked the largest quarter-over-quarter decline since the fourth quarter of 1984. Mild winters both this year and last were likely responsible for the steep decline in production in the beginning of this year. Electric power plants purchased more coal than they needed throughout the fourth quarter of 2015, resulting in a 34 MMst build in coal stockpiles, the highest Q4 net increase on record.

Electric power generators were encouraged to burn coal from their stockpiles rather than purchase more from coal producers in the first quarter of the year. Data from the American Association of Railroads showed coal carloads were down 20 percent quarter-over-quarter as power generators ordered less coal.

The drop in demand for coal was not concentrated in any particular region, either, the EIA reports. Texas, Michigan, Illinois and Oklahoma accounted for an average quarterly demand of 37 MMst of Powder River Basin coal in 2015, or about 40 percent of total PBR production. Demand for PBR coal from those four states fell 49 percent to 19 MMst in the first quarter of the year. First-quarter PBR coal production of 69 MMst was the lowest since 1995.

* * *

Just ask Hillary…


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




2 Nikkei closed DOWN 582.18 OR 3.53% /USA: YEN FALLS  TO 105.99

3. Europe stocks opened ALL IN THE RED  /USA dollar index UP to 94.50/Euro DOWN to 1.1271

3b Japan 10 year bond yield: FALLS  TO -.157%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 105.99

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  48.44  and Brent: 50.01

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 DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.019%   German bunds in negative yields from 9 years out

 Greece  sees its 2 year rate RISE to 9.75%/: 

3j Greek 10 year bond yield RISE to  : 7.83%   (YIELD CURVE NOW COMPLETELY INVERTED)

3k Gold at $1283.60/silver $17.32(7:45 am est)  RESISTANCE AT 16.52 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 21 in  roubles/dollar) 65.71-

3m oil into the 48 dollar handle for WTI and 50 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 .9657 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0887 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 9 Year German bund now  in negative territory with the 10 year FALLS to  + .019%

/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 1.619% early this morning. Thirty year rate  at 2.435% /POLICY ERROR)

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

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


Global Stocks Plunge; US Futures, Oil Slide As Brexit Fears “Jolt Markets”

Just last week we were commenting on the unprecedented level of complacency ahead of a plethora of June event catalysts, key among which the June 23 Brexit referendum vote. And then everything changed over the past few days, when the Leave camp was seen making dramatic gains in the polls, culminating with yesterday’s Opinium poll that has “Brexit” leading by a remarkable 19 points. That, and of course the 4 central bank meetings on deck, each of which has the capacity to shock and disappoint the markets if one of the world’s central banks says something that markets disagree with. 

But right now it is all about the immediate fate of the UK, and as Bloomberg explains the “jolted markets” and overnight plunge in global risk assets, “growing anxiety over the prospect of the U.K. exiting the European Union dominated financial markets, sending global stocks down for a third day and the British pound to an eight-week low while boosting demand for havens such as the yen and gold.”

“There are many uncertainties, so we could continue seeing declines and touch new lows in the days to come,” said John Plassard, a senior equity-sales trader at Mirabaud Securities in Geneva. “Even though nobody is expecting a rate hike, everyone will look at what Yellen will say at the press conference, and we are 10 days from the Brexit vote, and also days away from the election in Spain, while oil is lower and volatility is the highest in months.”

As we showed last night, the number of hedge fund net short position on cable is the highest since the summer of 2013, which of course means that should the vote go against the “Leave” camp, the short squeeze will be nothing short of spectacular.

Meanwhile, Asia was ugly, with the Yen soaring to its May highs (and the all important USDJPY carry trade plunging as a result) while Asian stocks slumped between 2%-3.5% as investors dumped risk assets ahead of UK’s referendum. The surge in the Yen slammed Japan, and the Nikkei was down a whopping 3.5%, just north of 16,000 as concerns about Kuroda’s (and Abe’s) professional career and tenure mount. China’s Shanghai Composite tumbled the most since February, dropping 3.2%, which is hardly the move those expecting a surge on a potential inlusion of China in the MSCI Index were hoping for.

But the worst was in Europe, where equities headed for the lowest close since February and the pound weakened against all of its 16 major peers after polls showed the outcome of a referendum on whether Britain will stay in the EU was too close to call. The yen rose toward its strongest level since 2014, while the cost of insuring corporate debt against default increased to the highest in more than two months. Oil retreated after a report showed a jump in U.S. drilling rigs, while massively bullish positioning by spec investors threatens a wipeout if and when the selling begins.

And since this “market” is all about momentum, those who were euphoric just days ago, are now panicking: “There are many uncertainties, so we could continue seeing declines and touch new lows in the days to come,” said John Plassard, a senior equity-sales trader at Mirabaud Securities in Geneva. “Even though nobody is expecting a rate hike, everyone will look at what Yellen will say at the press conference, and we are 10 days from the Brexit vote, and also days away from the election in Spain, while oil is lower and volatility is the highest in months.”

Others blame uncertainty: “The market hates uncertainty,” said Yoshinori Ogawa, a markets strategist at Okasan Securities Co. in Tokyo. “Most market participants think that the U.K. will probably remain, but we’re seeing some poll results that show those who’ll vote to leave outnumber the ‘Remain’ camp.”

How dare central bankers allow uncertainty in the market. Please fix it immediately, and make it certain that even more trillions in future growth will be borrowed just to make the P&Ls of people like Ogawa rise some more.

And speaking of central banks, and specifically frontrunning them it goes without saying that global bonds yields fell to a fresh record low overnight, with new all time lows touch in both Japan and Germany, while US 10Y are down 2bps to 1.62% and very likely set to drop far lower as the great rotation out of stocks begins in earnest.

Market Snapshot

  • S&P 500 futures down 0.4% to 2079
  • Stoxx 600 down 1.5% to 328
  • FTSE 100 down 0.4% to 6093
  • DAX down 1.4% to 9701
  • S&P GSCI Index down 0.1% to 380.8
  • MSCI Asia Pacific down 2% to 128
  • MSCI Asia Pacific down 2% to 128
  • Nikkei 225 down 3.5% to 16019
  • Hang Seng down 2.5% to 20513
  • Shanghai Composite down 3.2% to 2833
  • US 10-yr yield down 2bps to 1.62%
  • German 10Yr yield down less than 1bp to 0.02%
  • Italian 10Yr yield up 5bps to 1.43%
  • Spanish 10Yr yield up 5bps to 1.48%
  • Dollar Index down 0.06% to 94.51
  • WTI Crude futures down 1.2% to $48.48
  • Brent Futures down 1% to $50.05
  • Gold spot up 0.7% to $1,283
  • Silver spot down 0.1% to $17.31

Global Top News

  • Brexit Risk Rattles Markets as Stocks Sink With Pound; Yen Jumps: Bearish bets on sterling are highest in almost 3 years
  • Asia Yields Follow Europe’s to All-Time Lows on Brexit Concern: Haven demand accelerates ahead of Fed, BOJ meetings
  • Apple holds Worldwide Developers Conference; Analysts expect biggest announcements on Siri, updates to operating systems
  • Symantec to Buy Security Firm Blue Coat for $4.65 Billion: cash deal will close around the third quarter of 2016
  • Orlando Massacre Shows Cracks in U.S. Bid to Stop Terrorism: FBI had twice interviewed alleged killer for terror links
  • Verizon, AT&T Said to Make Final Round Bids for Yahoo: Reuters: co. to start reaching out to bidders early as Monday
  • Disney’s Foreign Curse Could End With China Resort Project: Entertainment giant opens Shanghai Disneyland on June 16
  • Wal-Mart Names China Head to Replace Andy Clarke as Asda Chief: The change will take place July 11
  • Iran to Cut Gasoline Imports With $14 Billion Refinery Expansion: Country to build 5 refineries, expand existing plants
  • Merck, Pfizer Double Size of Diabetes Drug Study to Catch Rivals: Medicine cuts blood sugar levels, helps patients meet goal
  • J&J Diabetes Drug May Help With Weight Loss: Study: Combo was well tolerated, no new or unexpected safety signals
  • Canada Willing to Work With Bombardier on Share Structure: Reuters: Canada is willing to “find a solution” with Bombardier
  • Dr. Reddy’s to Buy Generics From Allergan, Teva for $350 Million: products are “complex generics” in various dosage forms, all but one awaiting U.S. approval.
  • U.S. Regulator NHTSA Says Tesla Clarified Agreement Language: U.S. safety agency analyzing data on Model S suspensions

Looking at regional markets, we start as usual in Asia, where equity markets traded with heavy losses following Friday’s negative close on Wall St. as the slump in energy prices weighed on sentiment. Energy names were among the underperformers in Nikkei 225 (-2.6%) after WTI crude futures fell below USD 49/bbl while a firmer JPY also soured exporter sentiment. Elsewhere, Chinese markets have conformed to the negative picture in Asia with the Shanghai Comp (-3.2%) crashing on its return from its 4-day weekend and also followed an unexpected decline in Foreign Direct Investment, while Australian markets were closed for the Queen’s Birthday. The Hang Seng China Enterprises Index of mainland stocks listed in Hong Kong fell 2.8 percent, down 4.9 percent over two days.  Finally, 10yr JGBs traded relatively flat despite risk-averse sentiment, although yields were pressured in early trade with the 5yr, 10yr, 20yr and 30yr declining to fresh record lows.

As we noted last night, two out of three key Chinese economic datapoints missed:

  • China FDI (May) Y/Y -1.0% vs. Exp. 5.0%. (Prey. 6.0%). (Newswires)
  • Chinese Retail Sales (May) Y/Y 10.00% vs. Exp. 10.10% (Prey. 10.10%)
  • Chinese Industrial Production YTD (May) Y/Y 5.90% vs. Exp. 5.90% (Prey. 5.80%)

Top Asian News

  • China’s Stocks Decline Most Since February on Economic Concern: Shanghai Composite Index dropped 3.2% at Monday’s close
  • China’s Economy Steadies in May Even as Investment Growth Slows: Industrial output climbs 6%, retail sales increase 10%
  • Asia Yields Follow Europe’s to All-Time Lows on Brexit Concern: Haven demand accelerates ahead of Fed, BOJ meetings this week
  • Abe Aide Sees Potential for BOJ Buying Riskier Corporate Debt: Nakahara says JGB buying should rise 20t yen a year
  • Richest Indian’s $41 Billion Push Spurs Reliance Bonds to Record: Yield on RIL’s perpetual dollar notes hit record low Friday
  • Lotte Scraps $4.5 Billion Hotel IPO as Probes Deepen Crisis: Co. cancels remaining IPO schedule after discussing with arrangers

Europe has suffered from the same risk off sentiment as has hit Asia, and stocks have been pressured as Brexit fears rise amid weekend polls leaning towards the leave camp.  As a result European equities headed for the lowest close since February and the pound weakened against all of its 16 major peers after polls showed the outcome of a referendum on whether Britain will stay in the EU was too close to call. Elsewhere, financials have been among the worst performers in Europe, weighed on the by the global uncertainty, while energy names have been weighed by the move lower in WTI which now resides sub USD 49/bbl.   Despite the soft tone, Bunds remain below 165.00 this morning and continue to trade in a tight range, with supply weighing on the German benchmark as Italians come to market with EUR 7-9bIn. Focus lies on whether the German benchmark will see yields slip below 0%. Similar to last week, global bond yields have fallen with Gilts and Bunds yet again hitting record lows.

The Stoxx Europe 600 Index dropped 1.5 percent at 10:50 a.m. in London. Carmakers posted the biggest decline of the 19 industry groups on the equity gauge, with BMW AG falling 2.1 percent after its sales chief told Automobilwoche that the U.S. market “will stagnate at best” in 2016. Energy companies also slid, led by Tullow Oil Plc, as crude retreated.

Top European News

  • Pound Judgment Day Means Either Drop to 30-Year Low or 5% Rally: Remain vote may send pound to highest level this year
  • ECB Says Oil-Price Slump Not the Global Boon It Might Have Been: Initial supply-driven price drop reflects slowing activity
  • SNB Braces for Brexit Tsunami as Franc Defenses Prepared: Swiss central bank to brief media after policy meeting June 16
  • StandChart CEO Cracking Down on ‘Above the Law’ Bankers: Firm addresses staff’s loans to each other, outside businesses
  • Putin Could Sketch Deal on Europe Gas Link in Talks With Juncker: Leaders may discuss Nord Stream 2 this week in Russia
  • Merkel Presses China on Investment Rules as Li Says No Trade War: Merkel chooses words to limit conflict on trip to Beijing
  • Rio Tinto Hires Goldman to Help Privatize Copper Unit: S. Times: Goldman Sachs has sounded out potential buyers

In FX, the early trade in Europe has been dominated by the risk off theme which as kept the JPY — primarily — on the front foot, with the USD/JPY making an initial test on 105.51 lows (from early April). We have managed to hold off this for now, but with the Euro bourses through the Friday lows, all eyes are now on Wall Street, which will dominate trade from here. Fresh losses for GBP as the latest EU polls over the weekend show the leave camp gaining favour again. Now just 10 days ahead of the 23 Jun referendum, the nerves are clearly telling and Cable has been pushed down towards 1.4100 and EUR/GBP now eyeing .8000. Trade in the CAD and AUD has been a little mixed, though with a heavy leaning to the downside, where risk sentiment dominates. EUR/USD is being largely buffered by cross rate flow with no discernible direction of note here. No data of note apart from the OPEC report due out at 11.00am London time, so we CAD may be a little livelier further into the session.

In commodities, WTI and Brent crude futures fell overnight and for much of the European session so far. West Texas Intermediate crude fell 1.1 percent to $48.53 a barrel after Baker Hughes Inc. data on Friday showed that rigs targeting crude in the U.S. rose by three to 328 last week, capping the longest run of weekly gains since August. Iran is seeking to boost output by 600,000 to 700,000 barrels a day over five years from fields in an area west of the Karoun River along the Iraqi border, Oil Minister Bijan Namdar Zanganeh said. Of note, today will see the release of the OPEC monthly report which does often provide volatility. Gold has been strong after Asian participant have entered back into the markets trading as high as $1284/oz looking to make new highs. Silver is currently trying to break through a consolidation area to get to new highs for the month and is currently trading at the USD 17.29 level. Copper prices are up 1.2 % at USD 4,572 on strong volume of 5,796 lots, lead is up 0.3 %, while the rest are weaker with zinc down 1% at USD 2,067.50. Total volume, overnight have been 11,512 lots.

There are no major economic releases on the US calendar today.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Global equities pressured amid softness in financials, while energy names track crude prices lower.
  • GBP trades with heavy losses as Brexit fears rise with the latest polls leaning towards the leave camp.
  • Light calendar today with no notable UK, EU or US data scheduled.
  • Treasuries rally in overnight trading while European equities head for lowest close since February and gold rallies amid Brexit concern; FOMC, BOJ, and BOE rate decisions this week.
  • The pound tumbled to the lowest level in two months against the dollar as anxiety about a potential British exit from the European Union continued to build
  • Prime Minister David Cameron turned to his traditional rivals in the opposition Labour Party to win over undecided voters with just 10 days to stop Britain from voting to leave the European Union
  • A British vote to leave the EU on June 23 would practically guarantee a surge in the franc, popular among investors at times of market stress, according to a Bloomberg survey of 23 economists
  • German 10Y yield fell to record-low 0.009% on Friday
  • Blackstone Group LP, the world’s largest private equity manager, expects this month to finish raising the biggest buyout pool yet designed to mimic the long-term, buy-and- hold strategy of Warren Buffett
  • Investors will get a first hint on Monday about how much Mario Draghi is prepared to pump into the corporate-bond market. At about 3:45 p.m. in Frankfurt, the ECB will report how much it spent on company bonds
  • With turnover shrinking at the fastest pace since at least 2006 banks are under growing pressure to either downsize their Asian equity desks or exit parts of the business altogether
  • China’s economy steadied in May as factory production held up and consumers and the government offered support against diminishing growth in private investment, which has been hurt by declines in old-line industries such as coal

US Event Calendar

  • No major economic data expected:

DB’s Jim Reid concludes the overnight wrap

In Friday’s EMR I discussed how at our Euro LevFin conference the day before one of the questions I polled the audience of several hundred was whether they thought the UK would vote to leave the EU? 83% thought ‘no’ which to be honest could have been even higher based on recent straw polls I’ve done. So it’s fair to say that there has been some complacency on this looming issue. However some of this unraveled in a risk-off day on Friday and then intensified after a shock poll (released late in the day) from ORB for the Independent newspaper (online sampling) showing a 10-point lead for “leave”. Sterling traded as low as $1.4198 in the evening session after being as high as $1.4473 in the morning session. This morning we are at $1.4185 as we go to print. The two weekend polls we’ve seen don’t corroborate this shock survey but show the polling back to being remarkably close with the Opinium poll for the Observer giving ‘Remain’ a narrow lead and YouGov for the Sunday Times giving ‘Leave’ a narrow lead. With 10 days to go until polling day it’s inevitable that the focus on this will step up aggressively from here.

As usual we’ll go through the full week ahead at the end but the highlights are clearly the FOMC conclusion on Wednesday and perhaps the BoJ on Thursday. US Retail sales tomorrow is also interesting and is probably the biggest release since payrolls 10 days ago. As for the Fed the main focus will be on the dots, economic projections and any signalling seen on rates in the statement and Yellen’s press conference. It’s hard not to see a fairly dovish outcome given payrolls and ‘Brexit’ risks but knowing the Fed several members will still want to keep the dots at fairly similar levels. Whether the market believes this is realistic is another matter.

Moving on to an important start to the week in China, the main monthly data dump is already out. Industrial production rose 6% YoY in May, in line with expectations. Retail sales climbed 10% last month (10.1% expected), while fixed-asset investment increased 9.6% YTD (annualised) which was the weakest since 2000 and below any of the consensus forecasts on Bloomberg.

Staying with China, the IMF deputy David Lipton discussed something we looked at in a Credit Bites last week namely Chinese corporate debt. He said that “Corporate debt remains a serious — and growing — problem that must be addressed immediately and with a commitment to serious reforms,”.

Asian markets are weak overnight following on from the risk off on Friday. The Nikkei is down -2.9%, Hang Seng -2.5% and China bourses down just under 1% as we go to print.

Global risk assets were hit hard on Friday with investors turning cautious ahead of the numerous risk events on the horizon. Despite some positive economic data (more on this later), European equities were battered with the STOXX 600 posting its third consecutive day of losses on Friday (-2.44%) and subsequently ending the week down by the same amount. Every sector ended the day lower with Banks (-3.66%), Insurance (-3.32%) and Financial Services (-2.94%) industry groups posting the worst losses likely in part down to rising ‘Brexit’ concerns. In fact, the broad sell off saw all but 17 out of 600 companies in the index end Friday in negative territory. The S&P 500 closed -0.92% but was actually fairly stable all day around that level. Oil fell nearly 3% which didn’t help the global sentiment with highs of $50.72 in the Asian session turning into $48.88 by the US close. This morning we are at $48.44. German 10Y yields got ever closer to zero as they hit fresh all time lows of 0.02% after dropping by -1.2bps on Friday and ending the week cumulatively lower by -4.8bps. Will this week be the one where we see it tip into negative territory?

Interestingly most of the data out of Europe was largely positive on Friday. Germany’s final May CPI number was unrevised as expected (+0.3% mom). Industrial production numbers for April out of France (+1.2% mom vs. +0.4% expected) and Italy (+0.5% vs. +0.3% expected) surprised on the upside. These figures rounded out the industrial production numbers for the Euro Area’s top four economies, with activity expanding in Italy, Germany and France (although it stalled in Spain). Given that these economies make up more than three-fourths of the Euro Area’s industrial output, the numbers so far are certainly positive signals ahead the Euro area figure due next week.

Over in the US, the preliminary June reading for the University of Michigan Consumer Sentiment Index clocked in slightly above expectations at 94.3 (vs. 94.0 expected) but still fell from the previous month’s one-year high of 94.7. Consumers’ optimism about their personal finances was offset by concerns about continued economic growth. While the year ahead expected inflation rate of 2.4% in June remained unchanged from May, long term inflation expectations fell to their lowest levels in nearly fifty years with consumers expecting an average inflation rate of just 2.3% over the next five years (down from expectations of 2.5% recorded in the prior two months).

Away from the data expect there to also be a big focus on the Fed’s revised dot plot projections which we’ll get at the Wednesday meeting along with Yellen’s press conference. Meanwhile over at the ECB we’ll hear from Nouy today and Nowotny on Thursday, before Draghi is scheduled to speak late afternoon on Friday. Meanwhile, Spanish PM Rajoy is due to hold a televised debate today ahead of the June 26th election which could be worth keeping an eye on.




i)Late  SUNDAY night/ MONDAY morning: Shanghai closed DOWN 94.08 POINTS OR 3.21%/ /Hang Sang closed DOWN 529.54 OR 2.52%. The Nikkei closed DOWN 582.18 POINTS OR 3.51% Australia’s all ordinaires  CLOSED DOWN 0.84% Chinese yuan (ONSHORE) closed DOWN at 6.5865 /Oil FELL to 48.44 dollars per barrel for WTI and 50.01 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.5989 yuan to the dollar vs 6.5865 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS 



Fitch lowers the boom on Japan as it cuts its credit outlook to negative:

(courtesy zero hedge)

Fitch Cuts Japan’s Credit Outlook To Negative

Following Abe’s decision to delay the April 2017 increase in the consumption tax, warnings about Japan’s rating (recall that Japan’s consolidated debt/GDP ratio is the highest in the world at 400%) were inevitable, and moments ago Fitch was the first to come out and while “affirming” Japan’s AA rating, it was the first major agency to cut its outlook from Stable to Negative. Expect the other two big agencies to do the same, followed inevitably by downgrades.

For now, however, the market does not care the tiniest bit about Japan’s ruinous fundamentals, and instead just wants to frontrun the BOJ inevitable easing, as a result yields across the Japanese curve have dropped to fresh record lows.

Here is the full note:

Fitch Ratings-Hong Kong-13 June 2016: Fitch Ratings has affirmed Japan’s Long-Term Foreign- and Local-Currency Issuer Default Ratings at ‘A’ and revised the Outlooks to Negative. The issue ratings on Japan’s senior unsecured local-currency bonds are also affirmed at ‘A’. The Country Ceiling is affirmed at ‘AA’ and the Short-Term Foreign-Currency IDR at ‘F1’.


The revision of the Outlooks on Japan’s IDRs to Negative from Stable reflects the following key rating drivers:

  • The Japanese government announced on 1 June that it had decided to delay a scheduled increase in the consumption tax from April 2017 until October 2019 (having already delayed the hike from the original date of October 2015), and did not identify any specific offsetting measures. The Outlook revision primarily reflects Fitch’s decreased confidence in the Japanese authorities’ commitment to fiscal consolidation.
  • The consumption tax increase was an important element in the government’s fiscal consolidation strategy, which aims to bring the primary deficit of the general account of the central and local governments into balance by the fiscal year from April 2020 to March 2021 (FY20), against a 3.3% deficit in FY15. Fitch had expected the increase in the consumption tax rate to 10% from 8% to yield about 0.8% of GDP for deficit reduction (netting out some enhanced social spending it would have funded; it is unclear whether these increases will still occur). When announcing the delay, the government said it remains committed to its target of primary balance by FY20, although it did not set out any further specific measures to achieve this goal.
  • Fitch no longer expects the consumption tax to rise in its base case. Fitch’s revised fiscal projections are for the ratio of gross general government debt to GDP to continue rising from 245% at end-2016 by 1-2pp per year over the projection period out to 2024, rather than peaking at 247% in 2020 as previously expected.
  • The government indicated that its primary reason for delaying the tax increase was to shore up growth and boost the prospects of escaping deflation. With the delay in the tax increase, Fitch has revised its 2017 growth forecast up to 0.7% from 0.5% at the time of the April 2016 review. Fitch has also revised its 2016 forecast up to 0.8% from 0.7%. The 2016 revision balances a negative effect from the absence of consumption brought forward into 2016 to beat the tax hike against the impact from the higher-than-expected quarter-on-quarter growth in 1Q of 1.9%, seasonally adjusted annual rate.

Japan’s ‘A’ IDRs also reflect the following rating factors:

  • Japan’s structural fundamentals sit comfortably alongside those of the most highly-rated sovereigns. Japan is one of the world’s most advanced, productive and wealthy economies. Japan’s standards of governance and the quality of its public institutions are among the strongest globally. The role of the Bank of Japan (BoJ) as issuer of an international reserve currency supports policy flexibility and debt tolerance. The country has a very high degree of social and political stability.
  • Japan’s credit profile benefits from the sovereign’s exceptionally strong debt tolerance and funding capacity, although these do not entirely offset weaknesses elsewhere in the public finances. The sovereign’s strong funding position partly reflects the deep pool of private-sector Japanese savings and the strong demand of the financial system for government debt. The Japanese domestic nonfinancial sector had gross financial assets of about 707% of GDP at end-2015, about the same as end-2014 and up from about 559% at end-2008.
  • Japan’s macroeconomic performance is a credit weakness. Nominal GDP growth has been much weaker than in most other advanced economies since the bursting of Japan’s financial bubble in the early 1990s. Aggressive “Abenomics” policies since early 2013 have not yet convincingly broken the economy out of deflation or demonstrably raised potential growth. The evidence on the effectiveness of the BoJ’s adoption of a negative interest rate in January 2016 is mixed so far. The BoJ is already expanding Japan’s monetary base by about 16% of GDP annually and may face technical constraints in expanding qualitative and quantitative easing further. These factors may force the central bank either to accept a decrease in its policy flexibility or to consider less orthodox means of easing policy with less well understood transmission channels and uncertain effects on business, household and investor confidence.
  • Japan’s external finances are a rating strength both in terms of solvency and liquidity. Fitch estimates the country’s net external position in debt-like assets will reach 70% of GDP by end-2016. Official foreign reserves reached USD1,254bn at end-May 2016, up from USD1,233bn at end-2015.Fitch estimates Japan’s reserves will be worth about 18 months of current external payments by 2016, which is strong on any comparison.


Fitch’s proprietary SRM assigns Japan a score equivalent to a rating of ‘A+’ on the Long-Term Foreign-Currency IDR scale.

Fitch’s sovereign rating committee adjusted the output from the SRM to arrive at the final Long-Term Foreign-Currency IDR by applying its QO, relative to rated peers, as follows:

  • Macroeconomic Performance and Policy Management: -1 notch, to reflect relatively weak potential growth (most estimates range between 0.5% and 1% a year); rising uncertainty over fiscal strategy; and risk of constraints emerging on BoJ’s policy flexibility
  • Public Finances: -1 notch, to reflect fragile debt dynamics, more than offsetting the support from strong funding flexibility.
  • External Finances: +1 notch, to reflect strengths in Japan’s external finances not captured in the SRM, including the large net external creditor positions (both sovereign and whole-economy) and the structural current account surplus.

Fitch’s SRM is the agency’s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a Long-Term Foreign-Currency IDR. Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.


The main factors that could, individually or collectively, lead to a negative rating action are:

  • Lack of measures to compensate for the fiscal impact of the delay in the consumption tax increase, or other policy measures that further undermine Fitch’s confidence in political commitment to fiscal consolidation
  • Weaker macroeconomic performance than Fitch expects for a sustained period, intensifying the challenge of stabilising the public finances
  • A sharp and sustained rise in real interest rates on government debt to a level that undermined debt sustainability

The Rating Outlook is Negative. Consequently, Fitch’s sensitivity analysis does not currently anticipate developments with a high likelihood of leading to a positive rating change. Future developments that could individually, or collectively, result in the Outlook being revised to Stable include:

  • Policy adjustments leading to increased confidence that the Japanese authorities are committed to achieving fiscal consolidation
  • A stronger macroeconomic outlook than Fitch currently expects, making fiscal consolidation easier to achieve


  • The ratings assume that the confidence of the Japanese public in the country’s basic economic and financial stability is maintained, such that the Japanese sovereign’s exceptional funding flexibility remains intact.
  •  Fitch assumes that there is no significant escalation in global or regional geopolitical tensions, for example, Japan’s maritime territorial disputes with China, to a level that could disrupt economic activity.


Japanese large manufacturing was a disaster:  down to a reading of -.111 (from .-083)

Then came Chinese Industrial Production disappointed meeting expectations of 6.% year over year. Retail sales missed as it rose only 10% from year earlier.  They needed higher!

Also Chinese fixed asset investment rose only 9.6% and many expected higher.

(courtesy zero hedge)

Markets In Turmoil As Brexit Fears Mount And Japan, China Data Tumbles

FX, equity, and bond markets are in turmoil as Asian markets begin trading with Japan ugly, Sterling getting spanked, China devaluing FX (stocks down hard), and crude ($48 handle) and US equity futures (Dow -70) extending losses (as bond markets are all tumbling to record low yields). The hangover from further brexit concerns is not helped by the weakness in Japanese and Chinese data tonight.

First Japanese manufacturing data was a disaster…

Then Chinese data largely disappointed. A “meet” in Industrial Production – hovering at multi-year lows…


Retail Sales missed…*CHINA MAY RETAIL SALES RISE 10.0% FROM YEAR EARLIER (lowest since 2006)

And FAI missed… *CHINA JAN.-MAY FIXED-ASSET INVESTMENT EXC. RURAL RISES 9.6% (lowest since 2000)

And if the anxiety over global growth and Brexit were not enough, this China data has sparked even more turmoil in markets as Asia gets going…

First, Japan…


Japanese stocks shorts biggest since 2008…

And Japanese 10Y Yields record lows (along with 20Y and 5Y)…

But it’s not just Japan, Germany, and Switzerland…


In China, as we could have guessed by Bitcoin’s surge, the Yuan is tumbling…

PBOC devalues the Yuan fix by over 2 handles – back near 5 year lows…

As the Yuan basket plunged to lowest since Nov 2014

Chinese stocks are down most in 6 weeks:


And anything Brexit-related…

Cable at 2mo lows…

Sterling shorts biggest in 3 years…

and GBPJPY is a bloodbath… Pound plunging to lowest since Aug 2013…

And finally, gold is holidng its recent gains…

Despite the monkeyhammering it got earlier…

Which must be very upsetting for The BIS. Given this much turmoiling, one can only imagine the central bank efforts to make sure Monday opens green on the NYSE.

Charts: Bloomberg





Over the weekend, a new poll showing a shocking 19 point lead by the BREXIT side against the BREMAIN side. Cabinet Minister Smith did not help when he ponted out England will need 7 new prisons due to the massive increase if migrants heading to the UK.

(courtesy zero hedge)

Over in France, the garbage and rail strikes are certainly hampering business

(courtesy zero hedge)


Garbage Buries France As Labor Strikes Continue

Euro 2016 is underway in France and while the transportation strikes have been difficult to deal with, one problem is starting to come to the forefront: garbage.

Among the strikes that have taken place by workers, perhaps the one that’s been least talked about – until now – is that of the garbage collectors. A days old garbage strike is causing garbage to line the streets of Paris, just as millions of visitors are expected to visit for the

Euro tournament.

Due to embarrassment, and the fact that business has been lost, locals are growing increasingly frustrated the NYTreports.

“We’ve seen everything. First the attacks, then the floods, and now this.” said Julien Collard, who helps his father run a restaurant, Cafe de la Tourelle, adding “It’s disgusting. It stinks, and it brings rats. People see this, and they walk away.

“This, all this, it’s not good for tourists. We’ve got a lovely country here. But this is how we welcome people?And then, when the tourists get drunk, they’ll start messing with it.” said Omar Anraui, who was looking at the overflowing garbage cans from a bar down the street from Collard’s cafe.

Not all of Paris is covered in garbage however, half the city’s 20 districts are served by private companies that continue to collect the trash, and Paris’s City Hall on Friday announced the deployment of additional garbage trucks, promising the rest of the city would be cleaned up soon. Locals and tourists alike have a lot riding on that promise, because CGT leader Philippe Martinez said the strikes will continue, and the demonstration that is being called for Tuesday will be “enormous.”

We started with demonstrations, we did one, two, three, four. They didn’t listen to us. At a certain point the workers got mad and went on strike.” said Martinez.

There appears to be no end in site for the standoff between the government and the protesting workers. Prime Minister Manuel Valls (the one who originally helped president Hollande slam through labor reforms using an article of the constitution that allowed the government to bypass parliament, kicking off this entire debacle in the first place) said “I want these strikes to end as quickly as possible.” While ironically pointing out “There’s a debate in the union movement between those who are interested in dialogue, and those who are not. There is also a debate in French socialism. How do we reform in this country? Can a minority block? Reform is possible. It’s a question of political will.

As Carole Cossart, who works at an art gallery near the cafe puts it: “This isn’t exactly the best way to welcome the Euro, is it?” – no, sadly it is not, and given that there is no resolution in sight, the smell of garbage and transportation delays will inevitably continue. But for now, at least as a short-term relief for the people of France, France won its starting match over Romania.


This does not look good:  the ECB purchased only 340 million of European Corporate Bonds on its first day and some of that was junk rated. They are going to have great difficulty fulfilling their mandate as owners of bonds will refuse to part with their ownership over to the ECB:

(courtesy zero hedge)



€348 Million: ECB Releases First Total Of Corporate Bond Purchases


Deutsche bank now throws in the bullish towel as they state that we are heading lower:

(courtesy zero hedge)



A good indicator for global growth;  Apple 2016 iphone sales are fallling due to lower demand:

(courtesy zero hedge)

Apple 2016 iPhone Sales To Fall For The First Time Due To “Lukewarm Demand”, Shipments To Drop 8.6%

Another day, another warning about slowing demand for Apple products, this time once again out of Japan’s Nikkei (which in recent months has been quite vocal in its cautions about a substantial cliff in AAPL growth), which moments ago warned that Apple will see the first annual decline in iPhone shipments this year since the smartphone’s debut in 2007 “due to lukewarm demand for a new model, people familiar with the matter told Nikkei Asian Review.”

As Nikkei reports citing a person at a major supplier, overall iPhone shipments will total 210 to 220 million this year, falling as much as 8.6% from 2015.

“Hon Hai Precision Industry Chairman Terry Gou has told his staff that the demand for iPhones will remain feeble until at least early next year,” a source said. Hon Hai, better known as Foxconn Technology Group, declined to comment. Gou told Chinese Premier Li Keqiang in China in late May that the company’s overall orders were falling this year, although Foxconn did receive a sudden rush of orders in April and May. Foxconn makes about 70% of iPhones sold globally.

Foxconn reported that its revenue fell 5.5% year-on-year in the January-May period. Apple also reported its first sales decline in 13 years in the quarter ended in March, and forecast another drop in the current quarter.

Sources said that iPhone 7, the newest, lacked innovation, although the 5.5-inch model would feature dual lens, which offers a more powerful zoom.

Jeff Pu of Yuanta Investment Consulting estimated in a May report that total iPhone production this year would fall 12% year-on-year to 207 million units due to weak sales of iPhone 6s and 6s Plus.

The biggest problem for Apple? The same catalyst that sent the stock soaring in the past few years, only to drag it lower now – China.

Apple’s troubles are further exacerbated by growing challenges it faces in the slowing Chinese economy, a key market accounting for about 25% of its sales.


Suppliers said that a perceived change of strategy at Apple was also causing them problems. A source at a major supplier said that Apple’s current strategy of selling different colored iPhones has led to an inventory build-up for suppliers, compared with simpler color schemes and lower costs previously.

Actually it’s not just China – the complete lack of innovation is also troubling: “Apple’s resorting to colors instead of pursuing innovative features to boost sales shows that the company now has no way of breaking out of the current doldrums,” the source said.

Apple’s tendency to place extra orders also hurts suppliers. “Apple is always overbooking its capacity. It works only when demand is strong. However, when demand softens, it leads to inventory correction for all the suppliers,”said Lin Chien-nan, president of Wintek, a former major touch module supplier to Apple. WinTek filed for restructuring in late 2014 after expanding aggressively.

“There is no concrete contract between suppliers and Apple. Apple never signs a contract with a fixed price and guaranteed orders,” said Lin, “The orders are dynamic and could be adjusted every quarter.”

Meanwhile, expect Apple to issue even more bonds and use the proceeds to buyback stock as it is nowjust another, unimaginative, run-off-the-mill company besieged by bankers with ideas of “financial innovation.” Expect its multiple to reflect as much.



(courtesy zero hedge)

(courtesy zero hedge)

i) keeping the price of oil high

ii) killing the Nigerian economy

(courtesy zero hedge)

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




USA/CAN 1.2778 DOWN  .0004

Early THIS MONDAY morning in Europe, the Euro FELL by 23 basis points, trading now WELL above the important 1.08 level FALLING to 1.1271; 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 A MASSIVE 94.08 POINTS OR 3.21%  / Hang Sang CLOSED DOWN 528.18 OR 3.51%      / AUSTRALIA IS LOWER BY 0.84%/ EUROPEAN BOURSES ARE ALL IN THE RED  as they start their morning/

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

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

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

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

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

The NIKKEI: this MONDAY morning: closed DOWN 582.18 POINTS OR 3.51% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 529.18 POINTS OR 3.51% . ,Shanghai CLOSED FOR DOWN 94.08 / Australia BOURSE IN THE RED: /Nikkei (Japan) CLOSED IN THE RED /India’s Sensex IN THE RED

Gold very early morning trading: $1285.80


Early MONDAY morning USA 10 year bond yield: 1.619% !!! DOWN 3 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.435 DOWN 1/2 in basis points from FRIDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early MONDAY morning: 94.50 DOWN 7 CENTS from FRIDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers MONDAY MORNING


And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield:  3.22% UP 12 in basis points from FRIDAY

JAPANESE BOND YIELD: -0.157% DOWN 3  in   basis points from FRIDAY

SPANISH 10 YR BOND YIELD:1.50%  UP  7 IN basis points from FRIDAY

ITALIAN 10 YR BOND YIELD: 1.45  UP 7 IN basis points from FRIDAY

the Italian 10 yr bond yield is trading 5 points lower than Spain.




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


Euro/USA 1.1293 UP .0044 (Euro =UP 44 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 106.19 DOWN .744 (Yen UP 75 basis points )

Great Britain/USA 1.4225 DOWN.0025 ( Pound DOWN 25 basis points/(HUGE BREXIT CONCERN)

USA/Canada 1.2800- UP 0.0020 (Canadian dollar DOWN 20 basis points  AS OIL FELL  (WTI AT $48.85).


This afternoon, the Euro was UP by 44 basis points to trade at 1.1293

The Yen ROSE to 106.19 for a GAIN of 74 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was DOWN 25 basis points, trading at 1.4225( BREXIT FEARS INCREASE DRAMATICALLY )

The Canadian dollar FELL by 20 basis points to 1.2800, WITH WTI OIL AT:  $48.83

The USA/Yuan closed at 6.5822/

the 10 yr Japanese bond yield closed at -.157% DOWN 3 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 1/4 IN basis points from FRIDAY at 1.6180% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.436 DOWN 1/4 in basis points on the day ( HUGE POLICY ERROR)


Your closing USA dollar index, 94.34 DOWN 32 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 MONDAY

London:  CLOSED DOWN 70.79 OR 1.16%
German Dax :CLOSED DOWN 177.18 OR  1.80%
Paris Cac  CLOSED DOWN 79.70  OR 1.85%
Spain IBEX CLOSED DOWN 186.70 OR 2.20%
Italian MIB: CLOSED DOWN 498.29 OR 2.91%

The Dow was DOWN 132.86  points or 0.74%

NASDAQ DOWN 46.11 points or 0.94%
WTI Oil price; 48.87 at 4:30 pm;

Brent Oil: 50.28




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: 50.05

USA 10 YR BOND YIELD: 1.6111%

USA DOLLAR INDEX: 94.36 DOWN 31 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.42449 down 0.0007

German 10 yr bond yield at 5 pm: .024%


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


VIX Soars Most In 10 Months As Stocks Dump, Gold Jumps

Remember those ‘almost’ all-time-highs?…


First things first, the impressive surge in stocks off the Feb lows have been accompanied by an almost unprecedented collapse in equity trading volumes…

h/t Brad Wishak at NewEdge


And as volume has plunged so VIX has exploded in the last few days – in a very similar way to its China-induced August collapse…


With VIX surging above 21 – 4-month highs – as defending 2,100 is now a long-lost memory…


Who could have seen this coming? Well us and anyone who pays attention to the ripples of turmoil from Chinese FX to Saudi forwards to hong Kong money markets to US equities…

And in case you think that’s just a spurious correlation, eat this…


Of course, no matter the terrorist attack in Florida, soaring Brexit risk, ugly Chinese and Japanese data, the moment US equity markets opened, it was panic-buying time… (but as futures show that didn’t last)…


Small Caps and Trannies were worst on the day…


The opening spike was all USDJPY momo ignition but 106.50 seemed to run out of steam…as NYMEX closed


But bonds and bullion remain the big winners post-payrolls… Bad news is bad news after all…


It seems FX, bonds, and Gold were right after all…


Treasury yields kept falling…


As rate-hike odds tumble further (along with Fed credibility)


The US Dollar Index slipped notably from the US Open to around the EU close – but was relatively stable aside from that… (cable was noisy as rumors of a ‘good’ brexit poll turned into news of a bad one)…


Copper outperformed (presumably bad chinese news is good for stiumulus hype?) as crude slipped and PMs managed small gains…


Overnight trading in precious metals was insane as it seems The BIS is getting upset… but is losing…


Charts: Bloomberg



The worst mass shooting in USA history/50 dead and 53 wounded.

(courtesy zero hedge)

50 Dead, 53 Wounded In Orlando Nightclub Terrorist Attack – Deadliest Mass Shooting In US History

The Supreme Court of the USA strikes down Puerto Rico’s debt restructuring plan.  it is now up to Congress to bail out Puerto Rico;

(courtesy zero hedge)


Puerto Rico Bonds Jump As Supreme Court Strikes Down Debt Restructuring: Only Congress Can Bail Them Out Now

Puerto Rico’s attempt at passing a law that would enable the US territory to restructure debts has been struck down by the US Supreme court.

Excluded from being able to use Chapter 9, Puerto Rico passed the Recovery Act in 2014 which would allow the territory to put public entities into bankruptcy, thus forcing haircuts to creditors such as Franklin Advisors and OppenheimerFunds. However in a very definitive 5-2 ruling handed down this morning from the US Supreme Court, the law was struck down, providing at least temporary relief for bondholders.

From Bloomberg

The U.S. Supreme Court struck down a Puerto Rico law that would have let its public utilities restructure their debt over the objection of creditors. The ruling leaves it to Congress to help the island resolve its fiscal crisis.


Siding with bondholders challenging the law, the court ruled 5-2 that the measure was barred under federal bankruptcy law.


The Recovery Act, as the local law was known, would have directly affected more than $20 billion in utility debt and given the commonwealth more leverage in handling the rest of the $70 billion it owes.

The island and its agencies face a $2 billion payment due July 1. Puerto Rico defaulted May 1 on $370 million of Government Development Bank debt. Prices on some commonwealth debt increased Monday after the ruling.

A Puerto Rico Aqueduct and Sewer Authority bond rallied on the news.

Federal law lets states authorize bankruptcy filings by public utilities and other municipalities but bars Puerto Rico and the District of Columbia from doing the same thing. Puerto Rico sought to get around that provision in 2014 by passing a local law that offers an option similar to bankruptcy.


Writing for the Supreme Court majority, Justice Clarence Thomas said Congress didn’t authorize Puerto Rico to take that step.


“Our constitutional structure does not permit this court to rewrite the statute that Congress has enacted,” Thomas wrote.


Justices Sonia Sotomayor and Ruth Bader Ginsburg dissented. They said Puerto Rico was right that Congress didn’t mean to leave the island without access to either federal or local restructuring law.


“Congress could step in to resolve Puerto Rico’s crisis,” said Sotomayor, whose parents were born in Puerto Rico. “But, in the interim, the government and people of Puerto Rico should not have to wait for possible congressional action to avert the consequences of unreliable electricity, transportation, and safe water.”

The decision leaves Puerto Rico dependent on Congress to extricate the island from its difficulties.Lawmakers are working on legislation that would create a federal oversight board to help manage the island’s budgets and supervise a debt restructuring. A ruling backing the Recovery Act might have given Puerto Rico and its allies more leverage in that process.

Congress will now have to change legislation in order to allow Puerto Rico to enter bankruptcy in order to restructure its debts, something that is already in progress. As we reported, the House has passed a bill last week that would allow for an oversight board to be appointed by Congress and the president which will determine whether and when to initiate debt restructuring – the bill has now been handed off to the Senate.



Well that about does it for today

I will see you tomorrow


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