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Fed balance sheet grows to record again in latest week “The Fed’s balance sheet – a broad gauge of its lending to the financial system – stood at $3.276 trillion on April 24, up from $3.252 trillion on April 17.” U.S. Treasury securities held by the Federal Reserve: All Maturities (TREAST) 2013-04-24: 1,836,227 Millions of Dollars Hide Last 5 Observations 2013-04-17: 2013-04-10: 2013-04-03: 2013-03-27: Weekly, As of Wednesday, Not Seasonally Adjusted, Updated: 2013-04-25 3:53 PM CDT U.S. Fed balance sheet grows again in latest week “The Fed’s balance sheet liabilities, a broad gauge of its lending to the financial system, stood at $3.210 trillion on April 10, compared with $3.198 trillion on April 3. The Fed’s holdings of Treasuries totaled $1.814 trillion as of Wednesday, up from $1.806 trillion the previous week” U.S. Treasury securities held by the Federal Reserve: All Maturities (TREAST) 2013-04-03: 2013-03-27: 2013-03-20: 2013-03-13: SAX I was a super bull of long-term bonds. I stated my case over 3 years ago with a yield target on 30-year maturities of 2.5%. Back then, the timing and structure looked right for another run to new highs. Discussions about hyperinflation were premature. The pre-condition I had been waiting for has now arrived. In my opinion, we have seen the end of the bull market in bonds. There is a delicate [...] thetrader.se “We Finally Really Did It” Planet Of The Apes Style – Peter Tchir Guest post by Peter Tchir. With part of NYC under water this week, I can’t shake the image of the Statue of Liberty from the end of the Planet of the Apes. In that case, the devastation was something mankind had done to itself. In many ways, it is hard to imagine people making such a big mistake [...] If ECB disappoints the market tomorrow, it will trigger sharp worldwide selloff and global recession! Definition of ‘Black Thursday’ The name given to Thursday, October 24, 1929, when the New York Stock Exchange plummeted, leading to the Great Depression of the 1930s. The Most Powerful Man In The World Is Going To Speak Tomorrow Today is turning out to be kind of quiet, but we just want to remind you that tomorrow is going to be pretty nuts. For weeks, the entire [...] Prime Minister Mariano Rajoy delayed seeking a second rescue for Spain while pledging to continue bailing out its regions as Valencia requested more money to settle bills and cover debt. Rajoy spoke today following a meeting in Madrid with French President Francois Hollande. Catalonia, Valencia and Murcia this week claimed more than half of an 18 billion-euro ($23 billion) fund announced by Rajoy last month to help the regions face bond redemptions and finance [...] Beggars can once again be choosers. In other news, non-news (the Catalan bailout was announced at least two times before) is news again, and magically drives the amnesiac market all over again. From Cinco Dias, courtesy of the always amusing google translate, which makes any news, no matter how tragic, quite hilarious without fail:
“Catalonia 5,023,000 calls but will not accept the State Policies The Catalan government today applied to join the Spanish [...] From WSJ: … Talk of replacing Libor with other benchmarks is likely to remain just that for two reasons: No substitute would easily work for all the financial instruments Libor serves, and rewriting derivatives contracts tied to Libor would be an herculean, and legally fraught, task. The “new and improved” Libor would almost certainly do away with the current gymnastics-scoring-meets-clairvoyance method of calculation. At present, large banks submit daily estimates of their costs of [...] From FT: This assumption is currently far from being satisfied. The euro area financial market, in all segments and maturities – including the very short term money markets – does not function properly, as banks deposit their excess liquidity with the central bank instead of lending to other banks. Cross-border banking flows have dried up. Households and firms across the union borrow at rates which depend more on the respective sovereign [...] http://www.twitter.com/lindayueh So much for convincing investors that Europe is fixed. The European Central Bank’s latest monetary policy decision—a 25 bps rate cut—hasn’t bolstered confidence, either. UPDATE: Markets across Europe are tanking, although France and Germany are off their lows. No such luck for Spain. A quick look at the scoreboard: German DAX: -0.6% The IBEX 35 is just getting destroyed:
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Even more worrisome is the fact that borrowing costs are shooting higher [...] From Sober Look: Investors seem to have a bottomless appetite for investment grade (IG) corporate paper. Issuers are coming to market to borrow money at ridiculously low rates. Even for the longer maturities, the spreads are 1-2% above the corresponding Treasury yield. Here are some examples: Tyco: 10-year notes at Treasurys + 190bp The number of Americans filing new claims for unemployment benefits was little changed last week, according to government data on Thursday that suggested the labor market was struggling to regain momentum. Initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 387,000, the Labor Department said. The prior week’s figure was revised up to 389,000 from the previously reported 386,000. Economists polled by Reuters had forecast claims falling to 380,000 [...] Hours before Spain is expected to present the bank “assessment” from Roland Berger and Oliver Wyman on its comprehensive bank insolvency status, the country sold €2.22 billion of two-, three- and five-year government bonds, in a sale which saw solid demand but yields that are simply laughable and are completely unsustainable, culminating with a record yield on 5 year paper. Per Reuters, the Treasury sold 700 million euros worth of [...] In a meaningless “test” of investor appetite for Spain’s Thursday issuance of 2, 3 and 5 years bonds, Spain today sold €3.04 billion in 12 and 18 month bills, well inside the LTRO maturity, and completely meaningless from a risk perspective – after all even Greece is issuing Bills. Yet for some reason the market which continues to be dumber by the day, somehow took the “successful” auction as an [...] Fitch cuts Spain by 3 notches to BBB, just 2 notches above junk, reasons: recap bank = 6-9% of GDP, recession thru 2013, high foreign debts First it Egan-Jones (of course). Then S&P. Now Fitch (which sees the Spanish bank recap burden between €60 and a massive €100 billion!) joins the downgrade party of rating agencies that have Spain at a sub-A rating. Only Moody’s is left. What happens when Moody’s [...] The Spanish government plans to issue about 30 billion euros ($39 billion) of so-called hispabonds to help regions of the country pay debt maturities and finance the deficit, El Mundo reported today, without citing anyone. The sale of hispabonds, which would allow regions to issue debt jointly, is scheduled to start in June and is being designed by the economy ministry, the newspaper said. by Zh In yet another 2011 déjà vu moment, Europe’s bank funding window is slamming shut again (the catalyst that brought the 2011 Euro crisis vintage to its heights). Nowhere is this more evident than when comparing monthly debt issuance in the first 4 months of 2012 to the previous two years. Sadly, even despite taking place while the LTRO effect was front and center, Europe still was unable to match [...] It’s all about flow! In fact STOCK actually work’s in the opposite direction. The fact that the Fed already owns Trillions of stock, means they have to SELL it before we talk about moving away from ZIRP and get back to normal. It’s like the lockup period after an IPO. The government needs to issue $1ttn+ of new debt each year PLUS rollover $2-$3 trillion of maturities. But the smart money has already figured out [...] Via Peter Tchir of TF Market Advisors, Italy has issued €157 billion of debt between November of last year and the end of last week. This is direct Italian government issuance and doesn’t include any of the debt the government has guaranteed in the meantime, which seems to be at least €70 billion more, but hey, who counts guaranteed debt. Of the €157 billion that has been issued, about €122 billion matures within [...] From Bloomberg: Spain has never been so close to default and Greece, Ireland and Portugal may need further bailouts, Citigroup Inc. chief economist Willem Buiter said. “Spain is the key country about which I’m most worried,” Buiter, a former Bank of England policy maker, said in a radio interview today on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It’s really moved to the wrong side of the spectrum and is now at greater risk of sovereign restructuring than [...] From Bank of America The risks to our outlook The successful Greek PSI addresses – but does not eliminate – a key contagion risk for US financial markets. Clearly risks are reduced due to the absence of major debt maturities in the coming years as well as the escrow account for interest payments. However, risks remain as the second bailout package for Greece may unravel if the country fails to deliver on [...] By Sara Sjolin LONDON (MarketWatch) — New Greek bonds issued after the country’s 206-billion-euro ($270 billion) bond-swap deal last week started trading Monday at the highest yields in the euro zone, according to media reports. The debt-laden country issued 20 new bonds with maturities between 11 and 30 years and early pricing showed that bonds with the shortest maturity traded at yields around 19%, while the 2042 bond traded at [...] Back on December 21, the day when the deus ex 3 year LTRO was completed and €489 billion in gross capital was provided to banks at a 1.00% cost, of which €210 billion was net new incremental capital (pro forma for rolling maturities), the ECB deposit facility usage was €265 billion. As of Friday, the ECB announced deposits have grown to just shy of €500 billion, or a new record of €493 billion (which pays [...] Yes, it would increase the amount to service national debt. But leaving rates artificially low in the face of a discouraged Bond market would require the Fed to buy Treasuries (or cancel the auction and raise the question of default) thereby increasing the National Debt and the cost to service. Of the two the later is slower, albeit a Faustian Bargain. But both the spector of default AND awareness of [...] If 100% of the company’s borrowings with maturities of one year or less were to run-off, available cash and equivalents, securities available for sale (net of marks-to-market) and the company’s “capacity to withdraw collateralized funds from Fed and FHLB,” would leave Bank of America with $32.2 billion in excess liquidity. If 50% of Bank of America’s institutional deposits and jumbo CDs were drawn down, funding of trading assets and loans held-for-sale [...] |
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