Peso, Loonie Jump On Reports US-Mexico NAFTA “Handshake Deal” To Be Announced Thursday

One could be forgiven for thinking this sudden ‘coming to the table’ could be related to today’s Trump-related tumult, but away from that cynicism, Politico reports that the Trump administration is planning to announce Thursday that it has reached a breakthrough in NAFTA talks with Mexico.


The Mexican Peso popped to two-week highs on the news…


Citing three unidentified people close to the talks, Politico notes that this “handshake” deal announcement on Thursday, wouldclear the way for Canada to rejoin negotiations to revise the free trade pact.

And the Loonie jumped…


Away from the positive news-cycle distraction this may be for President Trump, Mexico has for weeks been pressing to wrap up at least a preliminary deal by Aug. 25 in order for current President Enrique Peña Nieto to have time to sign it before he leaves office Dec. 1.

However, even if Pena Nieto signs the Nafta deal, it will be up to a Mexican Senate controlled by AMLO’s allies to pass it, and to AMLO to implement it. That requires a deal that both can accept.


Yields falter badly after the USA denies the NAFTA deal.  Both the Cdn dollar and Mexican peso collapse

(courtesy zerohedge)

Yield Curve Collapses After US Denies NAFTA Deal: “Major Issues Remain Outstanding”

Late on Tuesday night, in a move which we said could be related to Trump-related tumult, Politico reported that the Trump administration is planning to announce Thursday that it has reached a breakthrough in NAFTA talks with Mexico.

Citing three unidentified people close to the talks, Politico said that this “handshake” deal announcement on Thursday, would clear the way for Canada to rejoin negotiations to revise the free trade pact. The news promptly sent the loonie and peso higher.

However, shortly after the announcement, both Mexico and Canada pushed back against the report, and on Wednesday morning, a spokesperson for the US Trade Representative confirmed that “there is no deal yet” as “major Nafta issues remain outstanding.”

Predictably, the latest denial hit both the MXN and CAD lower…



… while US 10Y futures jumped to highs, rising as high as 120-22+, sending yields to session lows of 2.812%, the lowest level since July 6, and slammed the yield curve even flatter, pushing the 2s10s curve to 21bps, the flattest level all the was back to August 2007.


Michael Snyder states that the lines and the global leaders are telling us exactly what is coming

(courtesy Michael Snyder/Economic Collapse Blog)



Snyder: Read Between The Lines & Global Leaders Are Telling Us Exactly What Is Coming

Authored by Michael Snyder via The Economic Collapse blog,

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong. 


And when things start to really get crazy, “the spin” is often the exact opposite of the truth.  In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine.

Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008.  Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression.  Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero.  They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived.  A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

Mark Cuban is not stupid.  Like Warren Buffett, he is sitting on giant piles of cash as he waits for stock valuations to return to their long-term averages.  And when “something happens”, Cuban insists that he is “ready, willing and able” to make some bold moves…

Billionaire entrepreneur Mark Cuban told CNBC on Monday that he’s holding much more cash than he normally does because he’s concerned about the stock market and U.S debt levels.

“I’m down to maybe four dividend-owning stocks, two shorts, and Amazon and Netflix. I’ve got a whole lot of cash on the sidelines,” Cuban said on “Fast Money Halftime Report.” “[I’m] ready, willing and able if something happens” to invest.

Deutsche Bank: We need our employees to “take every opportunity to restrict non-essential travel” in order to cut costs.

Translation: We are on the verge of collapse, and we have got to save every single penny that we can right now.

If you follow my work on a regular basis, you already know that I have been extremely hard on Deutsche Bank.  The biggest bank in Europe is teetering on the brink, and this latest move is more evidence that their days are numbered

Forget the days of traveling first class to meet clients: Deutsche Bank, which following major management upheaval in the past year, is telling its employees to take the bus whenever possible.

In the latest indignity to befall the bank’s employees, in a memo sent by Deutsche Bank CFO James von Moltke, the biggest European bank – if certainly not by market cap – urged employees to “take every opportunity to restrict non-essential travel” until the end of the year adding that “with your help, we will meet our cost-reduction targets.”

Italian Cabinet Undersecretary Giancarlo Giorgetti“I hope that the quantitative easing program will go forward.”

Translation: If the ECB does not buy our bonds, the Italian financial system is toast.

Italy will almost certainly be the fulcrum of the next European financial crisis, and the truth is that the EU will not have enough money to bail Italy out once it collapses.

So the Italians desperately need the ECB to continue buying their bonds, and the new Italian government seems to understand this very well

Italian Cabinet Undersecretary Giancarlo Giorgetti said he hopes the European Central Bank’s quantitative easing program will be extended to help protect the country from financial speculators.

Italy also needs to be credible to help shield itself, Giorgetti said in an interview with newspaper Il Messaggero. After the Genoa bridge disaster, the country may boost its extra spending request to the European Union, he said.

Signs of trouble continue to erupt in the United States as well.  The trade war is taking a huge toll on businesses of all sizes, and sometimes it is rural America that is being hurt the most.

For instance, the looming closure of the Element Electronics factory in Winnsboro, South Carolina would be absolutely crippling for that community…

TVs at the plant are made out of components that are imported from China, and the tariffs make assembling the TVs here a losing proposition, the company has said. The company is fighting for a waiver but is bracing for shutdown.

Winnsboro is the seat of Fairfield County, where a third of the population lives in poverty. Unemployment among its nearly 23,000 residents is second highest in the state, and, despite periodic rebounds, the population has fallen steadily over the past century.

“This is going to be a ghost town,” Winnsboro resident Herbert Workman said.

In this day and age, we are trained to be optimistic, and that can be a good thing.

But there comes a point when blind optimism causes us to lose touch with reality, and many believe that we have already crossed that threshold.


This is important: Goldman slashes 10 yr bond yield across the entire globe.  So much for global growth

(courtesy zerohedge/Goldman Sachs)

Goldman Slashes 10-Year Bond Yield Forecasts Across The Globe

Repeating what has become an annual tradition, this morning Goldman – which started off the year expecting higher 10Y yields around the globe on assumptions of rising economic growth and stronger inflation – cut its bond yield forecasts for all the G-10 countries based on changes in the outlook for monetary policy and inflation in several regions and less recovery in term premium in the U.S.

“We have generally revised our path for yields lower on two grounds: First, we tweak our forecasts to reflect changes to local policy expectations and inflation trajectories.  Second, we now expect a smaller amount of term premium repricing in the US and, by extension, smaller spillover effects into other non-US yields” Goldman’s Praveen Korapaty wrote however adding that “the direction of travel is still higher yields across the G10.”

Goldman’s changes to the path for US, Canada, and Norway bond yields “are modest for 2018” while elsewhere the bank “revised down its 10-year yield forecasts more sharply.” The reason is that In both the Euro area and Japan, we account for a later start to normalization following ECB and BoJ forward guidance this summer and a weaker inflation path. In the UK, we lowered the path for Gilts by 50-60bp in 2018 as we mark-to-market political risks associated with Brexit.

Downward adjustments to end-2018 forecasts for U.S., Canada and Norway yields were “modest”; expectations were lowered “more sharply” for euro-area and Japan yields “based on later start of policy normalization by the ECB and the BOJ’s forward guidance from July, as well as a weaker inflation path.”

Broken down by region, for the US, Goldman cut its end-2018 forecast for the 10-year Treasury yield to 3.10% from 3.25% and lowered the cycle peak level by 20bp to 3.4%. The revision to U.S. forecasts reflect lower expectations for term premium recovery, now forecast to increase by 30bp-40bp. Goldman’s clarifies that its Fed call is unchanged, with another six hikes expected, one per quarter until the fed funds rate reaches a range of 3.25% to 3.5%.

Elsewhere, Goldman predicts that 10-year German, U.K. and JGB yields will end 2018 at 0.5%, 1.45% and 0.12% respectively,

Goldman’s Euro-area growth remains above trend but slow relative to 2017, and underlying core inflation should remain stuck at 1%, leaving ECB unlikely to raise deposit rates before next summer, Goldman predicts.

The ECB appears to share a similar outlook, suggesting that it is unlikely to raise the deposit rate before next summer. As a result, pricing of deposit rate hikes in EONIA forwards has dropped a fair bit (Exhibit 2), dragging 10y core yields lower in the process.

There’s also less upward momentum in term premium due in part to “an expected overhang from the Italian budget standoff.”

Goldman also writes that that markets are underpricing what we think will be the likely path of policy rates in the Euro area—for instance, our economists expect a 20bp hike to the deposit rate by 4Q2019 (likely in October), and about 70bp by YE2020, but EONIA forwards are pricing only a ~40bp increase. Over the course of next year and 2020, as the ECB.

For the UK, Goldman concedes that “Projecting UK yields is a trickier exercise, given the uncertainty around a Brexit agreement,” Goldman says; their baseline scenario is that PM May gets a withdrawal treaty through parliament very late in 2018 or in 1Q 2019. Remote chance of no deal nonetheless requires “a risk premium.”

In Japan, “recent forward guidance from the BoJ effectively rules out further ‘tweaks’ to monetary policy, at least until the effects of a consumption tax hike begin to dwindle.”

And here is Goldman’s detail justification of the latest downward yield revision:

Since we last published these forecasts, several facts have changed that necessitated updates to our projections, including ECB and BoJ forward guidance, political developments in Italy, and more modest assumptions for term premium repricing.

As can be seen in Exhibit 1, our new projections are lower across the board for this year, although the direction of travel is still towards higher yields.

We now forecast that US 10y yields will be around 3.10% (vs. 3.25% previously) by year-end 2018. 

The changes we have made to European and Japanese forecasts are more substantial—with 10y German, UK, and Japanese rates ending the year at 0.5%, 1.45% and 0.12% respectively. These revised forecasts are still 10-20bp above forwards for end-2018, except in the case of Japan, where our projection is modestly below the forward.

Finally, Goldman’s long term forecast through year-end 2021, are only slightly lower in the case of the US, Germany, Sweden, and Norway (by 15-25bp), whereas revisions for Japan, Canada, Australia and New Zealand are more substantial (45-60bp).