€348 Million: ECB Releases First Total Of Corporate Bond Purchases
By Tyler Durden
As part of today’s update of the ECB’s asset purchases, the central bank announced for the first time, in addition to its various other sovereign and covered-bond purchases, just how many corporate bonds it had bought in the open market under its infamous CSPP, or corporate bond buying program, which officially launched on June 3.
The result: a mere €348 million in purchases on the first day in which the program was operational.
From the ECB:
The Eurosystem started to buy corporate sector bonds under the corporate sector purchase programme (CSPP) on 8 June 2016. The measure helps to further strengthen the pass-through of the Eurosystem’s asset purchases to financing conditions of the real economy, and, in conjunction with the other non-standard monetary policy measures in place, provides further monetary policy accommodation.
As the footnote to the chart adds, this represents purchases made on the first day of trading:
The figure reported for the first week only covers purchases settled by Friday 10 June and, therefore, effectively only secondary market purchases made on the first day of the CSPP implementation on Wednesday 8 June are covered.
Bloomberg previously reported that among the names purchased on the first day of CSPP were some of the most “liquid” names available anywhere including Engie, Telecom Italia, Telefonica, Anheuser-Busch InBev NV, Siemens, Assicurazioni Generali, Renault SA and RWE AG.
This is concerning because it reveals just how how illiquid the European corporate bond market has become. Recall that last Friday, using market data from Trax, CNBC reported that 19% of all corporate bond activity in the first two days of the CSPP program was down to the European Central Bank’s corporate bond-buying program.
Data from Trax released Friday showed that in the whole of 2015, corporate bond buying accounted for 12% of all corporate bond activity processed by Trax. This number went up to 14% in just the first half of 2016, the firm reported. The company processes approximately 65 percent of all fixed income transactions in Europe through its post-trade services.
If accurate, this means that the entire European secondary bond market has become a desolate wasteland of actual transactions, with a paltry €1.8 billion in total trades implied (assuming €348MM is 19% of all trades) even with the market boldly able to trade knowing the ECB is backstopping it.
It also means that the ECB will likely have a very hard time completing its mandate and finding enough willing sellers of corporate bonds in the coming months.
To be sure, the price action is starting to hint at troubles ahead.
The next question is which bonds did the ECB purchase. While we already know some of the names acquired by the ECB, which included companies which were for all intents and purposes rated junk, the first list will be published on Monday, 18 July with details of all the holdings.
Microsoft to buy LinkedIn for $26 billion
Microsoft announces an all-cash deal for LinkedIn, paying a 50% premium over Friday’s closing price.
…read more
Source: Microsoft to buy LinkedIn for $26 billion
Key Events In The Coming Busy Week
By Tyler Durden
This week, the market’s attention will be mostly focused on this week’s two key central bank meetings, namely the Fed on Wednesday and the BOJ on Thursday.
Fed officials’ meeting, on Tuesday and Wednesday, will conclude with release of their latest interest-rate decision, economic projections and a press conference with Chairwoman Janet Yellen. Earlier in the year, the meeting was considered a likely time for the central bank to raise its benchmark interest rate. Alas, with reality refusing to comply with the recovery “narrative”, that possibility has been dashed when the latest jobs report showed a sharp slowdown in May hiring. Still, the projections and press conference will be parsed for clues for when a rate increase could come.
Elsewhere, with the Yen soaring to the highest levels since June, and getting danerously close to the USDJPY 100 level, at which the BOJ may have no choice but to boost its QE, perhaps in the form of buying even more equities via ETF purchases; one thing that is almost certain will not happen is further rate cuts now that global revulsion to NIRP has forced central banks to turn their back on this particular experiment approach.
A quick rundown of day by day events:
- With little in the way of data today, we’re jumping straight to Tuesday where we’ll be starting in Japan with the final industrial production print for April. In Europe tomorrow we’ll get the latest May inflation docket in the UK with CPI/PPI/RPI all due out, while also in focus will be the April industrial production report for the Euro area. Over in the US on Tuesday the big release is the May retail sales print where headline sales are expected to have risen +0.3% mom which is also what’s expected for the core ex auto and gas sales reading. Also due to be released in the US tomorrow is the import price index for May, NFIB small business optimism reading and business inventories data for April.
- Wednesday looks set to be a busy day. In Europe we’ll get French CPI, the UK employment report and the Euro area trade balance reading. Meanwhile in the US the data releases include May’s PPI report, Empire manufacturing, industrial production and capacity utilization. The big event is reserved for later on Wednesday however when in the evening we’ll get the conclusion of the FOMC meeting.
- We’re sticking with the Central Bank theme on Thursday morning when the BoJ decision is due during the Asia session. During the European session on Thursday we’ve got UK retail sales due along with the May CPI report for the Euro area. Around midday we’re back to the Central Bank watch with the BoE decision due out. In the US on Thursday the big release is of course the May CPI report where current expectations are for +0.3% mom and +0.2% mom for the headline and core respectively. Also due out will be the weekly initial jobless claims data, NAHB housing market index and Philly …read more
Source: Key Events In The Coming Busy Week
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Global Stocks Plunge; US Futures, Oil Slide As Brexit Fears "Jolt Markets"
By Tyler Durden
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” …read more
Source: Global Stocks Plunge; US Futures, Oil Slide As Brexit Fears "Jolt Markets"
Fitch Cuts Japan’s Credit Outlook To Negative
By Tyler Durden
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’.
KEY RATING DRIVERS
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 …read more
Source: Fitch Cuts Japan’s Credit Outlook To Negative
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Look Out EU – Eurosceptic "United We Can" Party Surging In Spain
By Tyler Durden
Submitted by Michael Shedlock via MishTalk.com,
Not only does the EU have its hands full with a sudden surge in favor of Brexit, it also has to deal with a sudden surge in the popularity of Spain’s Eurosceptic “United We Can” party.
Center right Popular Party (PP) candidate and acting prime minister Mariano Rajoy was widely expected to gain seats following the failed election in 2015.
Recent polls shows PP is losing seats to the once fractured Podemos (We Can) party after it aligned with IU forming “United We Can”.
December 2015 Election Results vs. Current Projections
The above charts from El Pais.
Mighty PSOE Eclipsed by Far Left
The Financial Times reports Spain’s Once-Mighty Socialists Set to be Eclipsed by Far-Left.
The Spanish left is heading for a wrenching realignment at this month’s repeat general election, with a closely watched new poll suggesting that the centre-left Socialist party will be eclipsed by the far-left Unidos Podemos bloc.
With the official election campaign set to kick off at midnight on Thursday, Unidos Podemos was forecast to win 25.6 per cent of the vote and 88-92 seats in the 350-strong parliament.
The latest poll, by the respected state-funded CIS research institute, gave the once-mighty Socialists just 21.2 per cent and 78-80 seats. If confirmed on June 26, the day of the election, that shift would offer fresh evidence of the deepening crisis facing Europe’s embattled social democrats.
Last month, the anti-austerity Podemos party and the United Left, which includes Spain’s former Communist party, decided to set aside their rivalry and run on a joint list dubbed Unidos Podemos (United We Can). For the Socialists, the traditional standard-bearer of the left, the fallout from that deal appears to be highly damaging.
According to the CIS survey, the Socialists and Unidos Podemos could control as many as 172 seats in parliament, just four shy of an absolute majority. Meanwhile, the PP and the centrist, pro-business Ciudadanos party are predicted to win at most 160 seats between them.
But party leaders and analysts alike caution that the Socialists are deeply reluctant to throw in their lot with Unidos Podemos, especially if that alliance were to be led by Podemos chief Pablo Iglesias.
“I don’t see the Socialists supporting Iglesias as prime minister,” said José Fernández-Albertos, a political scientist at the CSIC research centre. “The more likely outcome is that they will abstain and let Rajoy govern [in minority] but will go into the opposition themselves. They will tell their supporters: We cannot support the PP but we also have to be responsible.”
Another Hung Election?
Mathematically, it appears there will be another hung election.
None of the other parties like PP or its corrupt leader, Mariano Rajoy.
A three-way coalition between Unidos Podemos, PSOE, and Ciudadanos is the least likely outcome.
Undecided Voters
Undecided voters will determine the outcome.
El Pais reports the CIS survey shows 11% abstainers and 22% of respondents who have are undecided. Abstention on December 20 was 26.8%.
The undecideds will determine the outcome. And they appear to be breaking towards …read more
Source: Look Out EU – Eurosceptic "United We Can" Party Surging In Spain
‘Hamilton’ cast didn’t use prop guns at Tonys
“Hamilton’s” Tony performance will not use prop muskets following the mass shooting in Orlando on Sunday. …read more
Source: ‘Hamilton’ cast didn’t use prop guns at Tonys
CIA Director John Brennan Believes The "28-Pages" Will Be Released & Quell Suspicion Of The Saudis
By Tyler Durden
The now infamous “28-Pages” is well known to most everyone – for those that forget, the final chapter of a Congressional investigative report was classified and left out of the documents handed over to the 9/11 commission, who ultimately produced the final report. What's also well known is the fact that upon hearing that the US was opening back up this can of worms, the Saudis threatened to sell $750 billion worth of treasuries and other US assets.
Since those events, the US Senate has passed legislation that would allow 9/11 victims or surviving family members to sue Saudi Arabia, and numerous people have speculated on whether or not the 28-pages would be declassified and released for public consumption. Most recently, perhaps the most prominent figure to discuss the release of the 28-pages is none other than CIA Director John Brennan. One would imagine that Brennan would be in the know regarding the contents of those pages, and as Reuters reports, Brennan said on Sunday that he expects the pages will be released. Furthermore, Brennan said that people shouldn't take them as evidence of Saudi Arabia being complicit in the attacks.
From Al Arabiya
These so called 28 pages that were part of the joint inquiry that was published in 2002. Just a year after 9/11, was a very preliminary review trying to pull together bits and pieces of information reporting who was responsible for 9/11. Subsequently, the 9/11 commission looked very thoroughly at these allegations of Saudi involvement, Saudi government involvement and their finding, their conclusion was that there was no evidence to indicate that the Saudi government as an institution or Saudi, senior Saudi officials individually had supported the 9/11 attacks. So these 28 pages I believe are going to come out and I think it’s good that they come out. People shouldn’t take them as evidence of Saudi complicity in the attacks. Indeed subsequently the assessments that have been done have shown it was very unfortunate that these attacks took place but this was the work of al-Qaeda, al-Zawahiri, and others of that ilk.
According to Reuters, former US Senator Bob Graham, who co-chaired the congressional inquiry into the attacks and is a strong advocate of the release of the papers, said that the White House will likely make a decision by June on whether or not it woiuld release the classified documents.
Whether or not Brennan was being sincere or whether this was a well timed interview that said the right things remains to be seen. However, it would be a significant step in the right direction to have the public actually be able to read and decipher the truth for themselves for once instead of the government dictating what the public can or can't handle like small children.
Also, Congressman Justin Amash (R-MI) has a different take on the 28-pages than Brennan, although he too wants the public to be able to read the documents for themselves.
CIA director must be referring to different 28 …read more
Source: CIA Director John Brennan Believes The "28-Pages" Will Be Released & Quell Suspicion Of The Saudis
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The EU Is Coming To Close Down Your Free Speech
By Tyler Durden
Submitted by Douglas Murray via The Gatestone Institute,
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The German Chancellor was not interested in the reinforcement of Europe's external borders, the re-erection of its internal borders, the institution of a workable asylum vetting system and the repatriation of people who had lied to gain entry into Europe. Instead, Chancellor Merkel wanted to know how Facebook's founder could help her restrict the free speech of Europeans, on Facebook and on other social media.
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Then, on May 31, the European Union announced a new online speech code to be enforced by four major tech companies, including Facebook and YouTube.
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It was clear from the outset that Facebook has a definitional problem as well as a political bias in deciding on these targets. What is Facebook's definition of 'racism'? What is its definition of 'xenophobia'? What, come to that, is its definition of 'hate speech'?
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Of course the EU is a government — and an unelected government at that — so its desire not just to avoid replying to its critics — but to criminalise their views and ban their contrary expressions — is as bad as the government of any country banning or criminalising the expression of opinion which is not adulatory of the government.
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People must speak up — must speak up now, and must speak up fast — in support of freedom of speech before it is taken away from them. It is, sadly, not an overstatement to say that our entire future depends on it.
It is nine months since Angela Merkel and Mark Zuckerberg tried to solve Europe's migrant crisis. Of course having caused the migrant crisis by announcing the doors of Europe as open to the entire third-world, Angela Merkel particularly would have been in a good position actually to try to solve this crisis.
But the German Chancellor was not interested in the reinforcement of Europe's external borders, the re-erection of its internal borders, the institution of a workable asylum vetting system and the repatriation of people who had lied to gain entry into Europe. Instead, Chancellor Merkel was interested in Facebook.
When seated with Mark Zuckerberg, Frau Merkel wanted to know how the Facebook founder could help her restrict the free speech of Europeans, on Facebook and on other social media. Speaking to Zuckerberg at a UN summit last September (and not aware that the microphones were picking her up) she asked what could be done to restrict people writing things on Facebook which were critical of her migration policy. 'Are you working on this?' she asked him. 'Yeah', Zuckerberg replied.
In the months that followed, we learned that this was not idle chatter over lunch. In January of this year, Facebook launched its 'Initiative for civil courage online', committing a million Euros to fund non-governmental organisations in its work to counter 'racist' and 'xenophobic' posts online. It also promised to remove 'hate speech' and expressions of 'xenophobia' from the Facebook website.
It was clear from the outset that Facebook has a definitional problem as well as a …read more
Source: The EU Is Coming To Close Down Your Free Speech
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