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“No Deal”: Tsipras Says Creditors Did Not Accept Greek Proposal
“No Deal”: Tsipras Says Creditors Did Not Accept Greek Proposal
Who could have possibly foreseen that the IMF would throw up all over the Greek “proposal”… aside from this post here “Why The IMF Will Reject The Latest Greek Proposal In Just Two Numbers” yesterday afternoon of course. In any event, moments ago Bloomberg reported that just as we wrote here yesterday afternoon, there is no deal and that Greek PM Alexis Tsipras told his associates that creditors not accepting equivalent fiscal measures has never happened before, according to a Greek govt official, who asked not to be named in line with policy.
Creditors “not accepting parametric measures has never happened before. Neither in Ireland, nor in Portugal, nor anywhere. This strange stance can hide two scenarios; they either don’t want an agreement or serve specific interests in Greece,” the official cited Tsipras as saying.”
As a reminder, Tsipras is meeting Wednesday with European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde and European Commission President Jean-Claude Juncker in an effort to reach a deal before Greece’s bailout expires and about 1.5 billion euros ($1.7 billion) in payments come due to the IMF on June 30.
Here is the man himself tweeting as much and confirming that the blame game continues:
The repeated rejection of equivalent measures by certain institutions never occurred before-neither in Ireland nor Portugal. #Greece (1/2)
…click on the above link to read the rest of the article…
Bond Markets Herald an End to Cheap Government Debt
Bond Markets Herald an End to Cheap Government Debt
Bond markets got choppy at the end of April, when institutional investors began lining up to bet against the market. Since then the situation has gotten worse for bond holders, as spiking yields in Germany, and even US Treasuries, have created a rush for the exit that some fear could turn into a stampede.
Volatility seems to be the new normal for bond markets after a long period of relative calm, and the trend will persist through the Fed’s expected interest rate hike in late 2015/early 2016. On Thursday the 10-year German bund yield reached 2015 highs of 0.995 percent, having languished as low as 0.049 percent just two months ago. It settled back down to 0.84 percent by end-of-trading on Friday.
Spiking yields are sending bond prices lower as holdings from an era of near-zero interest rates begin to lose their appeal. In a reversal of the usual order of things, the German bond market seems to be setting the tone for markets in the US and UK. Treasury yields were spiking alongside the German bund early Thursday, and the 10-year US Treasury yield closed at around 2.4 percent Friday – it’s highest since October of last year.
The reason behind the sudden volatility has divided market watchers. One possible explanation is that euro zone inflation came in at 0.3% for May, up from 0% in April. This suggests stubborn inflationary pressures that, even with low energy prices, will preclude the wave of global deflation that some traders have been betting on. If inflation is back, it doesn’t make sense to hold government debt with borderline negative yields.
…click on the above link to read the rest of the article…
QE Breeds Instability
QE Breeds Instability
Central bankers have promised ad nauseum to keep rates low for long periods of time. And they have delivered. Their claim is that this helps the economy recover, but that is just a silly idea.
What it does do is help create the illusion of a recovering economy. But that is mostly achieved by making price discovery impossible, not by increasing productivity or wages or innovation or anything like that. What we have is the financial system posing as the economy. And a vast majority of people falling for that sleight of hand.
Now the central bankers come face to face with Hyman Minsky’s credo that ‘Stability Breeds Instability’. Ultra low rates (ZIRP) are not a natural phenomenon, and that must of necessity mean that they distort economies in ways that are inherently unpredictable. For central bankers, investors, politicians, everyone.
That is the essence of what is being consistently denied, all the time. That is why QE policies, certainly in the theater they’re presently being executed in, will always fail. That is why they should never have been considered to begin with. The entire premise is false.
Ultra low rates are today starting to bite central bankers in the ass. The illusion of control is not the same as control. But Mario and Janet and Haruhiko, like their predecessors before them, are way past even contemplating the limits of their powers. They think pulling levers and and turning switches is enough to make economies do what they want.
Nobody talks anymore about how guys like Bernanke stated when the crisis truly hit that they were entering ‘uncharted territory’. That’s intriguing, if only because they’re way deeper into that territory now than they were back then. Presumably, that may have something to do with the perception that there actually is a recovery ongoing.
…click on the above link to read the rest of the article…
Stay Out Of Harm’s Way—-The Casino Is Fixing To Blow
Stay Out Of Harm’s Way—-The Casino Is Fixing To Blow
Shock waves have been rumbling through the global bond market in the last few days. On April 17 the yield on the 10-year German bund pierced through the 5bps level, but yesterday it tagged 100bps. That amounted to a 20X move in 39 trading days.
It also amounted to total annihilation if you were front running Mario Draghi’s bond buying campaign on 95% repo leverage and didn’t hit the sell button fast enough. And there were a lot of sell buttons to hit. The Italian 10-year yield has soared from a low of 1.03% in late March to 2.21% last night, and the yield on the Spanish bond has doubled in a similar manner.
Needless to say, this is not by way of a lamentation in behalf of the euro-bond speculators who have had their heads handed to them in recent days. After harvesting hundreds of billions of windfall gains since Draghi’s mid-2012 “whatever it takes ukase” they were overdue to get slapped around good and hard.
Instead, what we have here is just one more striking demonstration that financial markets are utterly broken. The notion of honest price discovery might as well be relegated to the museum of financial history.
The exact catalyst for yesterday’s panicked global bond sell-off, apparently, was Draghi’s public confession that although the ECB would stay the course on its $1.3 trillion QE program, it cannot prevent short-run “volatility” in the trading pits.
Why that should be a surprise to anyone is hard to fathom, but it does crystalize the “look ma, no hands” essence of today’s markets. The trading herd goes in the direction enabled by the central banks until a few dare devils finally fall off their bikes, causing an unexpected pile-up and inducing the pack to temporarily reverse direction.
…click on the above link to read the rest of the article…
Get Used to Selloffs, Central Bankers Say as They Fret about the Terrifying Moment When Liquidity Evaporates
Get Used to Selloffs, Central Bankers Say as They Fret about the Terrifying Moment When Liquidity Evaporates
Axel Weber, president of the Bundesbank and member of the ECB’s Governing Council until he quit both in 2011 to protest the ECB’s bond purchases, quickly landed a new gig: chairman of UBS. WHIRR went the revolving door. From this perch, he warned in 2012 that the easy-money policies and the expansion of central-bank balance sheets would lead to “new turmoil in the financial markets.” Now that the turmoil has arrived, he’s at it again.
“Volatility and repricing” – a euphemism for losses – are “part of getting back to normal,” he told NBC. We should get used to it, he said, echoing what ECB President Mario Draghi had said a couple of days ago. So no big deal. However, he was fretting “about the liquidity in the market, in particular under stress situations.”
Despite unleashing a deafening round of QE on the European markets, the ECB has watched helplessly as government bonds have done the opposite of what they should have done: Prices have plunged, and yields have spiked. The German 10-year yield soared in seven weeks from 0.05% to over 1% on Thursday, before settling down a bit. And it wasn’t even a “stress situation.”
US Treasuries have sold off sharply as well since the beginning of February, with the 10-year yield jumping from 1.65% to 2.31%, the worst selloff since the taper tantrum in 2013.
Now one word is on the official panic list: “liquidity.” They’re thinking about the terrifying moment when it suddenly evaporates.
Weber blamed central banks for the liquidity issues in the global bond markets. They’ve been buying “vast amounts of assets and putting them on their balance sheets”; not just government bonds but also corporate bonds. Since central banks “buy and hold,” they “take some liquidity out of the market.”
…click on the above link to read the rest of the article…
Mario Draghi’s Slippery Downward Slope
Mario Draghi’s Slippery Downward Slope
Mario Draghi made another huge faux pas Thursday, but it looks like the entire world press has become immune to them, because it happens all the time, because they don’t realize what it means, and because they have a message if not a mission to sell. But still, none of these things makes it alright. Nor does Draghi’s denying it was a faux pas to begin with.
And while that’s very worrisome, ‘the public’ appear to be as numbed and dumbed down to this as the media themselves are -largely due to ’cause and effect’, no doubt-. We saw an account of a North Korean defector yesterday lamenting that her country doesn’t have a functioning press, and we thought: get in line.
It’s one thing for the Bank of England to research the effects of a Brexit. It’s even inevitable that a central bank should do this, but both the process and the outcome would always have to remain under wraps. Why it was ‘accidentally’ emailed to the Guardian is hard to gauge, but it’s not a big news event that such a study takes place. The contents may yet turn out to be, but that doesn’t look all that likely.
The reason the study should remain secret is, of course, that a Brexit is a political decision, and a country’s central bank can not be party to such decisions.
It’s therefore quite another thing for ECB head Mario Draghi to speak in public about reforms inside the eurozone. Draghi can perhaps vent his opinion behind closed doors, for instance in talks with politicians in European nations, but any and all eurozone reforms remain exclusively political decisions, even if they are economic reforms, and therefore Draghi must stay away from the topic, certainly in public. Far away.
…click on the above link to read the rest of the article…
Is Mario Draghi Stupid, Crooked Or What?
Is Mario Draghi Stupid, Crooked Or What?
Europe is surely at the top of the heap among today’s raging financial market lunacy. It seems that Ireland has now broken into the negative interest rate club, investment grade multinationals are flocking to issue 1% debt on the euro-bond markets and, if yield is your thing, you can get all of 3.72% on the Merrill Lynch euro junk bond index.
That’s right. You can stick your head in a financial meat grinder and what you get for the hazard is essentially pocket change after inflation and taxes.
Remember, the average maturity here is in the range of 7-8 years. During the last ten years europe’s CPI averaged 2.0% and even during the last three deflationary years the CPI ex-energy averaged 1.2%. So unless you think oil prices are going down forever or that the money printers of the world have abolished inflation once and for all, the real after-tax return on euro junk has now been reduced to something less than a whole number. Has the reckless stretch for “yield” come down to this?
Well, no it hasn’t. Yield is apparently for suckers and retired school marms.
This is all about capital gains and playing momo games in the bond markets. It’s why euro junk debt—-along with every other find of sovereign and investment grade debt—-is soaring. In a word, bond prices are going up because bond prices are going up. It’s an utterly irrational speculative mania that would do the Dutch tulip bulb punters proud.
…click on the above link to read the rest of the article…
The Committee To Destroy The World
The Committee To Destroy The World
Last month, the world mourned the death of beloved actor Leonard Nimoy. Mr. Nimoy, of course, was renowned for his portrayal of the iconic character Mr. Spock on the 1960s television series Star Trek. One of the most memorable Star Trek inventions was the transporter that allowed human beings to be beamed through space and time like light and energy. Investors expecting central bankers to solve the world’s economic problems might as well believe that Janet Yellen is capable of beaming them straight into the Marriner S. Eccles Building in Washington, D.C. Their failure to acknowledge that the Fed is failing to generate sustainable economic growth while contributing to income inequality and crushing debt burdens is inexplicable. Central banks that purport to be promoting financial stability are actually undermining it – with the able assistance of regulators who have drained liquidity from the world’s most important markets.
Negative interest rates on $3 trillion of European debt are an obvious sign of policy failure, yet the policy elite stands mute. Actually that’s not correct – the cognoscenti is cheering on Mario Draghi as he destroys the European bond markets just as they celebrated Janet Yellen’s demolition of the Treasury market. Negative interest rates are not some curiosity; they represent a symptom of policy failure and a violation of the very tenets of capitalist economics. The same is true of persistent near-zero interest rates in the United States and Japan. Zero gravity renders it impossible for fiduciaries to generate positive returns for their clients, insurance companies to issue policies, and savers to entrust their money to banks. They are a byproduct of failed economic policies, not some clever device to defeat deflation and stimulate economic growth.
…click on the above link to read the rest of the article…
Dumping American Junk in Europe, Draghi Asked for it
Dumping American Junk in Europe, Draghi Asked for it
This is just the beginning, a new trend that may well turn into the next craze. ECB President Mario Draghi, in his infinite wisdom, asked for it: he’d driven the ECB deposit rate deeper into the negative, to -0.2%, and has promised to buy €60 billion of assets a month, including Eurozone government debt, other debt, and even, as German politician Frank Schäffler had predicted so poignantly in July 2012, “old bicycles.”
The ECB would buy this debt from its favorite banks, driving up the price so high that the yield would drop to -0.2%, same as the deposit rate. These banks are going to make a killing on the deal. And yields of Eurozone government debt have been plunging, with the German 10-year yield now at 0.15% on its way to -0.2%.
The goal: Make investors pay for the privilege of funding all governments across the Eurozone, just like depositors are being made to pay for the privilege of lending their hard-earned money to shaky banks.
Insurance companies, but also other financial institutions, hold high-grade bonds to create predicable income streams into the future with which to pay the promises they made to holders of their life insurance policies and annuities – a big part of the private pension system. But as yields are turning negative, future income streams fizzle. It’s undermining an entire retirement system.
…click on the above link to read the rest of the article…
The Unraveling Is Gathering Speed
The Unraveling Is Gathering Speed
Debt saturation and debt fatigue = diminishing returns on central bank tricks.
Does anyone else have the feeling that things are not just unraveling, but that the unraveling is gathering speed?
Though quantifying this perception is more interpretative than statistical, I think we can look at the ongoing debt crisis in Greece as an example of this acceleration of events.
The Greek debt crisis began in 2011 and reached a peak in 2012. The crisis was quelled by new Eurozone/IMF loans to Greece, and European Central Bank chief Mario Draghi’s famous “whatever it takes speech” in late July, 2012.
The Greek debt crisis quickly went from “boil” to “simmer,” where it stayed for almost two-and-a-half years. But no one with any knowledge of the gravity and precariousness of the situation expects the latest “extend and pretend” deal to patch everything together for another two years. Current deals are more likely to last a matter of months, not years.
We can discern the same diminishing returnsin Federal Reserve/central bank interventions, as the initial rounds of quantitative easing pushed stock and bond markets higher for years at a time, while the following interventions generated lower returns.
What factors are reducing the positive effects of intervention and causing increased volatility? Let’s start with the engine behind every central bank/state intervention and every “save” of the status quo: debt.
…click on the above link to read the rest of the article…
After Pillaging Pensions, Greece Raids Utilities To Repay Troika; Bonds Plunge As Bank Run Accelerates
After Pillaging Pensions, Greece Raids Utilities To Repay Troika; Bonds Plunge As Bank Run Accelerates
Following yesterday’s news that the ECB is now running simulationson what a Grexit would mean for Greek bond prices (spoiler alert:
“fundamentals” suggest a 95% loss), overnight we got more confirmation that Mario Draghi continues to tighten the screws on the Greek sovereign corpse, when Bloomberg reported that the ECB once again raised the maximum amount of emergency liquidity available to Greek lenders by €400 million, but less than the Greek central bank requested, people familiar with the decision said.
The increase was approved by the ECB’s Governing Council on Wednesday, the people said, asking not to be identified as the council meeting was private. Greece requested about 900 million euros, one of the people said. The increase should take ELA to about 70 billion euros. Policy makers raised the limit by 600 million euros on March 12, after a boost by 500 million euros to 68.8 billion euros on March 5. Greek banks haven’t used all their ELA and have a total of about 3 billion euros in liquidity available, one of the people said.
However, not a single penny from this additional emergency “liquidity” would enter the economy, as all of it was merely provided to offset the ever faster Greek bank run because as Reuters reported, on Wednesday Greek banks saw deposit outflows of €300 million,the highest in a single day since a February deal with the euro zone that staved off a banking collapse, two senior Greek bankers familiar with the matter said on Thursday.
…click on the above link to read the rest of the article…
It’s What Jesus Would Do, Right?
It’s What Jesus Would Do, Right?
On the day that Mario Draghi opened the ECB’s overly opulent new €1.3 billion palatial building(s) in Frankfurt, which led to fierce and fiery protests with hundreds arrested, amongst others from the Blockupy movement, and the IMF for some reason found it necessary to tell the eurozone that Greece is its most unhelpful client ever (really? let’s see the others) and to leak that finding to the press to boot, the Greek parliament voted in an anti-poverty law with a huge majority.
Oh, and it was also the day that a San Francisco church decided to dismantle an elaborate system of outdoor showerheads it had installed to get rid of those pesky homeless on its property. The showerheads would get the ‘rough sleepers’ soaking wet every hour or so. As one tweet said: “It’s what Jesus would do, right?” Anyway, enough protest was enough to get them backtracking.
I don’t know what the shower system cost, and who really cares, but I do know the price tag for the Greek law to help its poorest: €200 million. Or about 14% of what that one building cost (the EU has much more construction going on). Which, by the way, was announced as, I paraphrase and kid you not, “an example of what Europe is capable of”.
No comment there, I couldn’t have out it any better myself. One thing’s for sure: the building is not meant for the poor. There were thousands of cops at the opening alone to prevent them from entering. Cops paid for with taxpayer money, including that from the poor.
…click on the above link to read the rest of the article…
A Black Swan Lands In Southern Austria: The Ripple Effects Of “Mini-Greece Going Off In The Heartland Of Europe”
A Black Swan Lands In Southern Austria: The Ripple Effects Of “Mini-Greece Going Off In The Heartland Of Europe”
By far the most notable news of the past week, which has still gone largely unnoticed by the greater investing community whose focus instead was on whether algos would ramp the Nasdaq to 5000, and keep the S&P above 2100, even before Mario Draghi finally began buying bonds that nobody wants to sell, was the “Spectacular Development” In Austria, whereby the “bad bank” of failed Hypo Alpe Adria – the Heta Asset Resolution AG – itself went from good to bad, with its creditors forced into an involuntary “bail-in” following the “discovery” of a $8.5 billion capital hole in its balance sheet primarily related to ongoing deterioration in central and eastern European economies.
This shocking announcement promptly sent the price of Heta bonds crashing as creditors, no longer enjoying the explicit guarantee of the state, scrambled to get out of “northern Europe’s” first Lehman moment.
But while the acute pain came and went for Heta bondholders who have seen a nearly 50% loss in just a few short months, the bigger and far more diffuse pain is only just starting, or as Bloomberg put it, “Austria’s decision to wind down Heta Asset Resolution AG sent ripples through the financial system, causing credit rating downgrades in Austria and bank losses in Germany.”
The first casualty: the beautifully picturesque southern Austrian province of Carinthia.
…click on the above link to read the rest of the article…
Europe, The Morally Bankrupt Union
Europe, The Morally Bankrupt Union
The European Union is busy accomplishing something truly extraordinary: it is fast becoming such a spectacular failure that people don’t even recognize it as one. People have no idea, they just think: this can’t possibly be true, and they continue with their day. They should think again. Because the Grand European Failure is bound to lead to real life consequences soon, and they’ll be devastating. The union that was supposed to put an end to all fighting across the continent, is about to be the fuse that sets off a range of battles.
To its east, the EU is involved in a braindead attempt at further expansion – it has only one idea when it comes to size: bigger is always better -, an attempt that is proving to be such a disaster that heads will roll in the Brussels corridors no matter what. Europe has joined the US and NATO very enthusiastically in creating not just a failed state, but a veritable imitation of Hiroshima, in Ukraine, right on its own borders. The consequences of this will haunt the EU (or if it doesn’t last, which is highly plausible, its former members) not just for weeks or months or years, but for many decades.
The carefully re-crafted relationship with Russia, which took 25 years to build, was destroyed again in hardly over a year, something for which Angela Merkel deserves so much blame it may well end up being her main political legacy. Vladimir Putin, and Russia as a nation, will not easily forget the humiliation the west has thrown at them, the accusations, the innuendo, the attempts to draw them into a war they never wanted and in which they see no advantage for any party involved.
…click on the above link to read the rest of the article…
ECB Will Cut Rates To Minus 3%: JP Morgan
ECB Will Cut Rates To Minus 3%: JP Morgan
A running theme here over the past several weeks has been that the ECB’s €1.1 trillion foray into quantitative easing will be severely hindered by a laundry list of constraints (some of which were unwittingly self-imposed). Another topic we’ve covered exhaustively is the idea that the world’s central banks will likely all, in relatively short order, run up against the natural limits of accommodative monetary policy (indeed, even some Japanese policy makers are starting to agree on this).
Thinking about these two things in conjunction raises an interesting question for the ECB: if a tail event comes rearing its ugly head and the global central bank race to the bottom accelerates, will Mario Draghi, effectively fighting with one hand tied behind his back by virtue of Q€’s limitations, be able to fend off an outright collapse?
Here’s FT with more:
…the ECB is now close to running out of ammunition. The true constraints on further ECB intervention lie in the 25 per cent issue limit and 33 per cent issuer limit on its sovereign bond purchases.Except for Greek debt, the 25 per cent and 33 per cent caps should not prove binding in a scenario where the ECB keeps its monthly asset purchase pace of €60bn. However, the limits could be reached in worst-case scenarios where the ECB would have to boost the size of its QE programme or implement OMTs targeted on specific sovereigns.
…click on the above link to read the rest of the article…
