Over two years ago, in Jan 2018, we first showed that when it comes to betting on trouble in the investment grade bond market, investors had a preferred instrument for pessimism: shorting the LQD, the largest US investment grace corporate ETF. In retrospect, and loosely paraphrasing Crocodile Dundee, what happened to the LQD in Jan 2018 wasn’t trouble. This – as shown in the chart below […]
Fed
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Authored by Kladji Bregu via The Mises Institute, The Fed came out with a series of unprecedented measures on March 22, 2020. They announced the Fed will buy an unlimited amount of Treasurys and mortgage-backed securities (MBS), or as Peter Schiff refers to it, “QE infinity.” This has been very positively welcomed by many in the mainstream media and by businesses. Yet, what many are ignoring is that […]
As part of the Coronavirus CARES Act, the $2 trillion fiscal stimulus meant to resuscitate the US economy, Congress allocated $454 billion to help underwrite the special lending programs from the Federal Reserve. This could generate up to $4.540 trillion in new lending (assuming 10x leverage for highly-rated assets) likely geared toward small and medium-sized businesses. It now turns out that the first industry to benefit […]
There’s another ‘epidemic’ ripping through America that, for many on Wall Street, is just as terrifying as COVID-19… and this time The Fed is to blame. We reported last week on the multitude of mortgage companies that were facing an existential threat from massive margin calls: First, its was AG Mortgage Investment Trust which on Friday said it failed to meet some margin calls and doesn’t […]
Late on Thursday, we calculated that as of the end of this turbulent week, the Fed will have added a record $625 billion to its balance sheet, bringing the total to $5.5 trillion, an increase of $1.3 trillion in two weeks (6% of GDP), which was the amount the Fed monetized during all of QE1 in response to the financial crisis, but which took place over […]
After desperately trying to ramp to green, stocks are tumbling (along with bond yields) right after the Fed implicitly confirmed there is now a shortage of bonds as demonstrated by the recent repo ops that saw zero submissions – as discussed earlier as instead of using repo to park bonds with the Fed Dealers merely sell them back to the Fed – … … when it […]
There is a reason why the Fed took the unprecedented step to announce it would begin buying corporate bonds this week: according to Bank of America, which is looking at the latest EPFR fund flow data, March 20 was the “bond capitulation day” when a record $34.6BN in redemption from bond funds took place. This, together with the record outflows observed in the past two weeks […]
Two weeks ago, just after the Fed first announced its massive overnight and term repo operation expansion which now amounts to some $1 trillion in daily repo capacity (and before Powell expanded this bazooka to included ZIRP and unlimited QE), we said that this is a big mistake as the Fed was targeting the wrong liquidity conduit. Then, after the Fed launched QE across the entire […]
As previewed last night when we showed that in the past week the Fed has bought a staggering $587BN in Treasuries and MBS, we calculated that as of March 25, the Fed’s balance sheet would rise to a record $5.3 trillion, a phenomenal increase of $1.2 trillion in just the past two weeks, equivalent to roughly 5.6% of US GDP. Today, the release of the latest […]
Authored by Lance Roberts via RealInvestmentAdvice.com, Over the last couple of years, we have often discussed the impact of the Federal Reserve’s ongoing liquidity injections, which was causing distortions in financial markets, mal-investment, and the expansion of the “wealth gap.” Our concerns were readily dismissed as bearish as asset prices were rising. The excuse: “Don’t fight the Fed” However, after years of zero interest rates, never-ending support […]
Having moved from “Not QE” (or QE4 as it was correctly called), to the $750BN QE5 which came and went with the blink of an eye, to the Fed’s open-ended and unlimited QEnfinity in the span of one week, the full “shock and awe” of the Fed’s money printer is now on full display, and in just the past week, from March 19 to March 25, […]
Just last Friday we reported that the number of distressed debt in the US – roughly defined as bonds with a spread of over 10% – had soared, doubling in just two weeks to a remarkable $500 billion. Well, double it again. According to Bloomberg’s James Crombie, there is now about $1 trillion of debt trading at distressed levels after this month’s credit rout, “and it’s […]
While the words all sound like he cares about “we, the people,” we can’t help but feel like President Trump’s true driver in his anti-virus efforts are focused on the only thing that matters – the stock market. Having pushed the narrative all morning that he would like to see the economy re-open soon, CNBC’s Kayla Tausche reports that President Trump and VP Pence held an […]
The Richmond Fed Business Survey smashed expectations today – printing an expansionary +2, from February’s -2 – massively better than the -13 print expected… Source: Bloomberg The reason for this shocking beat is not optimism… or a sign of a corner being turned… it is purely technical and exposes the farce of these ‘soft’ surveys. The headline survey number was buoyed dramatically by a surge in […]
Business 13:46 GMT 24.03.2020(updated 13:56 GMT 24.03.2020) Get short URL This comes after high-ranking US Senate and White House officials appeared set to reach a $2 trillion deal to rescue the American economy from the crisis caused by the coronavirus outbreak. US stocks were up as much as 7 percent in Tuesday’s early trading, with the Dow Jones Industrial Average index rising more than 1,300 points […]
The main American stock indexes jumped on Tuesday on optimism that the huge government rescue bill to save the economy from the coronavirus is close to being passed, and an unlimited stimulus promise from the Federal Reserve. The Dow Jones Industrial Average jumped over 1,100 points higher after the opening bell, gaining over six percent. The S&P 500 was gaining nearly five percent, while the Nasdaq […]
Gold is up Monday and so are most cryptocurrencies, seemingly buoyed by the U.S. Federal Reserve’s drastic quantitative easing action to thwart the coronavirus’ effects on markets and the economy. Bitcoin (BTC) is up 7 percent as of 20:30 UTC. Over the past 24 hours it has been trading in a $5,600-$6,600 range coming out of a quiet weekend for the crypto market. Crypto asset performances […]
The Fed unveiled its ultimate bazooka today – unlimited buying of pretty much any- and every-thing until this all calms down. The problem is – it didn’t reassure investors as they’ve had 10 years of knowing that whatever The Fed ‘creates’ is simply money-printed delusion that does not reflect any real economic progress. Fed announces unlimited QE and sets up several new lending programs pic.twitter.com/PXjedWTBcx — […]
The Federal Reserve pledged Monday to buy bonds in an unlimited quantity while allocating at least $300 billion to new emergency-lending programs. These measures are being taken as Wall Street reels from fresh predictions of a steep drop-off in economic output due to coronavirus-related lockdowns, business disruptions and job losses. “The coronavirus pandemic is causing tremendous hardship across the United States and around the world,” the […]
Wall Street’s main indices are down after opening on Monday for the first ever all-electronic trading session, which is aimed at protecting New York Stock Exchange employees from the coronavirus. Both the Dow Jones Industrial Average and the S&P 500 were down around four percent as of 16:00 GMT. The Nasdaq Composite, an index comprised of America’s top technology companies, was down over two percent. Global […]
Update: ignore all of the below, because moments ago, with futures near limit down, the Fed announced it would pursue an unprecedented open-ended QE, which helped push futures sharply higher and are now green on the session. Bonds are bid across the board… … and investment grade credit is soaring, as the Fed – after every bank demanding it do so – finally caved, and announced […]
Over the past week there has been a groundswell of populist anger aimed at companies that used roughly $4 trillion in cash over the past decade to repurchase shares instead of, say, putting the money away for a rainy day fund (one which would be quite useful now that most companies are begging for a taxpayer bailout as a result of plunging liquidity). And while Senate […]
Bitcoin’s price shot up along with gold and stock futures after the U.S. Federal Reserve announced a quantitative easing package with no upper limit to support the economy amid the coronavirus crisis. Immediately after the 12:00 UTC announcement, bitcoin jumped from $5,860 to $6,628 in an hour, according to CoinDesk’s Bitcoin Price Index. Gold, a classic haven asset, rose from $1,494 to $1,524 over the same […]
Over the weekend, we reported that virtually all of Wall Street was praying for nothing short of divine intervention from the Fed, but would be content with the announcement of corporate bond buying, such as Bank of America… … and Deutsche Bank. On Monday morning, that’s precisely what they got when the Fed announced that it would indeed start purchasing corporate bonds. And in a way, […]