Posts Tagged ‘liquidity crisis’

Corporate Bonds Smacked, Yields Rise, Deals Pulled; Treasuries Rally; Yield Curve Flattens; Global Slowdown Coming

Corporate Bonds Smacked, Yields Rise, Deals Pulled; Treasuries Rally; Yield Curve Flattens; Global Slowdown Coming

Courtesy of Mish

The 30-year long bond is sitting just 3 basis points away from hitting a 3-handle and the yield on 5-year treasuries is 1.94 after hitting 2.60 in April. That is quite a reversal.

Yield on the 10-year note is at 3.13% a price last seen a year ago.

Meanwhile, Libor Shows Strain, Sales Dwindle, Spreads Soar

Corporate bond sales are poised for their worst month in a decade, while relative yields are rising the most since Lehman Brothers Holdings Inc.’s collapse, as the response by lawmakers to Europe’s sovereign debt crisis fails to inspire investor confidence.

Companies have issued $47 billion of debt in May, down from $183 billion in April and the least since December 1999, data compiled by Bloomberg show. The extra yield investors demand to hold company debt rather than benchmark government securities is headed for the biggest monthly increase since October 2008, Bank of America Merrill Lynch’s Global Broad Market index shows.

Junk bonds issued in the U.S. have been especially hard hit, with spreads expanding 141 basis points this month to 702, contributing to a loss of 3.78 percent. Leveraged loans, or those rated speculative grade, have also tumbled. The S&P/LSTA U.S. Leveraged Loan 100 Index ended last week at 89.23 cents on the dollar, from 92.90 cents on April 26.

Question of Solvency

“This is a quintessential liquidity crisis,” said William Cunningham, head of credit strategies and fixed-income research at Boston-based State Street Corp.’s investment unit, which oversees almost $2 trillion.

I disagree. This is a return, and rightfully so, to questions of solvency. Many corporations were given a new lease on life in May of 2009 by once again securing funding at cheap levels.

Now, huge cracks are appearing in the corporate bond market. At least seven junk bond deals have been pulled. This environment is not good for equities.

JNK – Lehman High Yield Bond ETF

click on chart for sharper image

Is this another scare like we saw in January and February or is this the real deal? I think the latter, but I thought so in February as well.

Notice how the top in junk bonds coincided with the top in equities. I cautioned many


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The mindset will not change; a depressionary relapse may be coming – European version

The mindset will not change; a depressionary relapse may be coming – European version

Courtesy of Edward Harrison at Credit Writedowns 

68-1533). Left on River.

In March I wrote an American version of this post which pointed to the bailout culture in America as a major reason I fear a depressionary relapse. American policy makers have shifted private losses onto the government’s books while propping up bankrupt companies in the private sector in order to forestall yet greater economic pain.

The mindset is fixed on re-engineering some semblance of past economic growth. The result has been a return in the US to the status quo ante of low savings, excess consumption, indebted households, and leveraged financial institutions, but with policy options significantly diminished and greater levels of government debt to boot. Clearly, when stimulus is withdrawn, policy makers should expect more severe economic bloodletting.

In Europe, the same bailout mentality is at work. However, the results are likely to be even more disastrous because of the fundamental misunderstanding of economics and financial sector balances amongst the policy elite in Euroland. The public and private sector cannot simultaneously net save unless the Europeans engineer a competitive currency devaluation. Therefore, the Europeans’ newfound fiscal austerity is at odds with the need of the private sector to reduce debt and will likely lead to a collapse in consumer demand and depression or a trade war. What Europe needs is to allow over-indebted nations to default, reducing the political and economic pressure of austerity.

Intra-Eurozone Trade wars

Canton, May 1858. Sale

Let me review how I come to that conclusion. This is a trade issue, first and foremost. The reason the Eurozone exists from an economic standpoint has to do with European interdependence from business trade. The eurozone functions as an internal market much the way the United States does, with the majority of trade occurring inside the region as opposed to externally with non-Eurozone countries.

When the Euro was formed, exchange rates were fixed and a common monetary policy came into being – much as we see for states in the US or provinces in Canada. Of course, monetary policy is not run for specific regions within the zone, but for the zone overall. And this invariably means that the European Central Bank’s monetary policy is geared more to the slow-growth core of Europe than the periphery.

During any business cycle then, current…
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Zero Hedge

Russia's Only Aircraft Carrier Has Erupted In Flames

Courtesy of ZeroHedge View original post here.

According to TASS News and social media footage, a fire has erupted onboard Russia's only aircraft carrier, Admiral Kuznetsov, at a naval dock in Murmansk, northwest Russia. The aircraft carrier was undergoing repairs and maintenance when fuel tanks caught fire.

RT News...



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Phil's Favorites

The British election explained in five key phrases

 

The British election explained in five key phrases

Courtesy of Veronika Koller, Lancaster University

The UK government’s decision to hold its third general election since 2015 is a baffling one to many – including the weary voters who have to take part.

Tensions have been high as the country attempts to resolve the identity crisis first sparked by the Brexit vote in 2016. It’s a complicated moment for the nation and, at times like these, it can help to observe the big issues through the lens of language. The slogans and terms that get thrown around again and again during a campaign can often tell us a lot about the bigger picture. Here are five such slogans that can help explain what’s happening in the UK right now.

‘Get Br...

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Digital Currencies

Three Men Arrested In NJ For Running Alleged $722 Million Crypto Ponzi Scheme

Courtesy of ZeroHedge View original post here.

Authored by Kollen Post via CoinTelegraph.com,

United States authorities in New Jersey have announced the arrest of three men who are accused of defrauding investors of over $722 million as part of alleged crypto ponzie scheme BitClub Network, per a Dec. 10 announcement from the Dep...



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Kimble Charting Solutions

Is Freeport McMoRan (FCX) Making A Run For the "Gold"?

Courtesy of Chris Kimble

Mining company Freeport McMoRan NYSE: FCX is enjoying the tailwind from a strong year for gold and silver prices. And although Copper prices are down, Copper has been turning up lately.

This has helped Freeport’s stock price recover in 2019 and has FCX testing a key breakout level.

Below is a “weekly” chart of Freeport McMoRan (FCX). The shaded channel outlined by each (1) highlights the longer-term downtrend that FCX has been stuck in.

But this could change on a dime, especially if FCX can breakout above (2). This area represents its re...



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Insider Scoop

Economic Data Scheduled For Wednesday

Courtesy of Benzinga

  • The MBA's index of mortgage application activity for the latest week is schedule for release at 7:00 a.m. ET.
  • The Consumer Price Index for November will be released at 8:30 a.m. ET.
  • The Census Bureau quarterly services survey report for the third quarter is schedule for release at 10:00 a.m. ET.
  • The Atlanta Fed's Business Inflation Expectations survey report for December will be released at 10:00 a.m. ET.
  • The Energy Information Administration’s weekly report on petroleum inventories in the U.S. is schedule for release at 10:30 a.m. ET.
  • The Federal Open Market Committee will announce its policy decision at 2:00 p.m. ET.
  • The U.S. Treasury budget report for November will be released at 2:00 p.m. ET.
  • ...


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Lee's Free Thinking

Chart Shows the Fed Ramping Up Not QE - Funding Almost All Treasury Issuance

 

Chart Shows the Fed Ramping Up Not QE – Funding Almost All Treasury Issuance

Courtesy of Lee Adler, Wall Street Examiner 

The Fed is ramping up “Not QE” .

The Fed bought $2.2 billion in notes today in its POMO, “not QE,” operations. Actually $2.15 billion because they sold back a whole $50 million. Must have been a little glitch in the force.

This brings the Fed’s total outright purchases of Treasuries to $170 billion since it started Not QE, on September 17.

It also did $107 billion in gross new repo loans to Primary Dealers to buy Tre...



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Chart School

Silver stock taking the sector higher

Courtesy of Read the Ticker

As the US economy begins to show late cycle characteristics like: GDP slowing, higher inflation, higher wage costs, CEO confidence slump. 
Previous Post: Gold Stocks Review

The big players in the market are looking for the next swing off good value lows. This means more money is finding it way into the gold and silver sector, and it is said gold and silver stocks actually lead the metal prices. The cycle below shows prices are ready to move in the months ahead (older chart re posted).




 

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Members' Corner

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

 

Sacha Baron Cohen Uses ADL Speech to Tear Apart Mark Zuckerberg and Facebook

By Matt Wilstein

Excerpt:

Sacha Baron Cohen accepted the International Leadership Award at the Anti-Defamation League’s Never is Now summit on anti-Semitism and hate Thursday. And the comedian and actor used his keynote speech to single out the one Jewish-American who he believes is doing the most to facilitate “hate and violence” in America: Facebook founder and CEO Mark Zuckerberg.

He began with a joke at the Trump administration’s expense. “Thank you, ADL, for this recognition and your work in fighting racism, hate and bigotry,” Baron Cohen said, according to his prepared...



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The Technical Traders

VIX Warns Of Imminent Market Correction

Courtesy of Technical Traders

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX. These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance. This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. 

Vix Value Drops Before Monthly Expiration

When the VIX falls to levels below 12~13, this typically v...



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Biotech

Why telling people with diabetes to use Walmart insulin can be dangerous advice

Reminder: We are available to chat with Members, comments are found below each post.

 

Why telling people with diabetes to use Walmart insulin can be dangerous advice

A vial of insulin. Prices for the drug, crucial for those with diabetes, have soared in recent years. Oleksandr Nagaiets/Shutterstock.com

Courtesy of Jeffrey Bennett, Vanderbilt University

About 7.4 million people ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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