Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1148.30 down $5.00 (comex closing time)
Silver: $15.56 down 4 cents (comex closing time)
In the access market 5:15 pm
Gold $1148.28
Silver: $15.52
Gold/silver trading: see kitco charts on the right side of the commentary.
Following is a brief outline on gold and silver comex figures for today:
The gold comex today had a poor delivery day, registering 0 notices served for nil oz. Silver comex registered 0 notices for nil oz .
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 250.04 tonnes for a loss of 53 tonnes over that period. Lately the removals have been rising!
In silver, the open interest rose by another astonishing 1,388 contracts as yesterday’s silver price was up by 12 cents. The total silver OI continues to remain extremely high with today’s reading at 178,548 contracts. The front month of March fell by 113 contracts. We are now at a multi year high in the OI despite a record low price. This dichotomy has been happening now for quite a while and defies logic.What is also strange today is the fact that the OI went up with a very tiny volume yesterday. This must be scaring our bankers to no end.
We had 0 notices served upon for nil oz.
In gold we had a rise in OI with gold up by $0.70 yesterday. The total comex gold OI rests tonight at 425,743 for a gain of 1512 contracts. Today, surprisingly we again had 0 notices served upon for nil oz.
Today, we had a constant inventory at the GLD/Inventory rests at 750.67 tonnes
In silver, /SLV we had no change in inventory at the SLV/Inventory, remaining at 327.332 million oz
We have a few important stories to bring to your attention today…
1, Again, huge OI increases in silver despite lower prices/silver OI at multi year highs and yet silver is extremely low in price. (harvey)
2,Greece scrambles to raise 2 billion euros
(zero hedge)
3. Banco Madrid fails and puts itself into bankruptcy
(Wall Street Journal)
4. Russia escalates military presence: deploys bombers to the Crimea
(zero hedge)
5.Australia and other western nations joining the Asian development bank much to the anger of the USA
(UKTelegraph)
6.The big Jefferies bank reports (they always report one month ahead of everyone) states that their fixed income revenue is down 56%/this portends poor earnings for our bankers this quarter.
(zero hedge)
7. Housing starts down considerably this month
(courtesy zero hedge/Dave Kranzler IRD)
8. Multiple bankruptcies in the energy patch today:
i) Quicksilver
ii) CalDive International
iii) BPZ resources
iv) Sabine Oil
we have these and other stories for you tonight.
Let us now head over to the comex and assess trading over there today.
Here are today’s comex results:
The total gold comex open interest rose by 1388 contracts from 424,231 up to 425,743 as gold was up by $0.70 yesterday (at the comex close). We are now in the contract month of March which saw it’s OI lower to 110 for a loss of 1 contract. We had 1 notice filed upon yesterday so we neither lost nor gained any gold contracts standing for delivery in this delivery month of March. The next big active delivery month is April and here the OI fell by 4555 contracts down to 209,310. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 72,913. The confirmed volume on Friday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 152,941 contracts. It seems that our HFT boys showed up for work today. Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose again by an extremely high 1,388 contracts from 177,160 up t0 178,548 despite the fact that silver was up by only 12 cents with respect yesterday’s trading and equally astonishing that the volume yesterday was extremely light. We are now in the active contract month of March and here the OI fell by 113 contracts down to 692. We had 113 contracts served upon yesterday. Thus we neither lost nor gained any silver contracts standing in this March delivery month. The estimated volume today was simply awful at 14,766 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 29,421 contracts which is poor in volume. We had 0 notices filed for nil oz today.
March initial standings
March 17.2015
Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
2411.25 oz (Scotia)
Deposits to the Dealer Inventory in oz
1700.04 oz (Brinks)
Deposits to the Customer Inventory, in oz
nil
No of oz served (contracts) today
0 contracts (nil oz)
No of oz to be served (notices)
110 contracts (11,000 oz)
Total monthly oz gold served (contracts) so far this month
6 contracts(600 oz)
Total accumulative withdrawals of gold from the Dealers inventory this month
114,790.651 oz
Total accumulative withdrawal of gold from the Customer inventory this month
397,971. oz
Today, we had 1 dealer transaction
total Dealer withdrawals: nil oz
we had 1 dealer deposit
i) Into Brinks: 1700.04 oz
total dealer deposit: 1700.04 oz
we had 1 customer withdrawals
i) Out of Scotia: 2411.25 oz (75 kilobars)
total customer withdrawal: 2411.25 oz
we had 0 customer deposits:
total customer deposits; nil oz
We had 0 adjustments
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (6) x 100 oz or 600 oz , to which we add the difference between the open interest for the front month of March (110) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.
Thus the initial standings for gold for the March contract month:
No of notices served so far (6) x 100 oz or ounces + {OI for the front month (110) – the number of notices served upon today (1) x 100 oz} = 11,600 oz or.3608 tonnes
we neither lost nor gained any gold ounces standing for delivery in this March contract month.
Total dealer inventory: 658,344.514 oz or 20.477 tonnes
Total gold inventory (dealer and customer) = 8.033 million oz. (250.04) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 53.0 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real. I cannot see continual additions of strictly kilobars.
end
And now for silver
March silver initial standings
March 17 2015:
Silver
Ounces
Withdrawals from Dealers Inventory
nil oz
Withdrawals from Customer Inventory
101,659.46 oz (Brinks,Scotia,HSBC)
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory
2059.500 oz (Delaware)
No of oz served (contracts)
0 contracts (nil oz)
No of oz to be served (notices)
692 contracts (3,460,000)
Total monthly oz silver served (contracts)
1883 contracts (9,415,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month
4,277,815.1 oz
Today, we had 0 deposit into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 1 customer deposits:
i) Into Delaware: 2059.500 oz
total customer deposit: 2059.500 oz
We had 3 customer withdrawals:
i) Out of Brinks: 20,737.1 oz
ii) Out of Scotia: 60,792.500 oz
iii) Out of HSBC: 20,129.86 oz
total withdrawals; 101,659.46 oz
we had 0 adjustment
Total dealer inventory: 69.433 million oz
Total of all silver inventory (dealer and customer) 176.332 million oz
.
The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in March, we take the total number of notices filed for the month so far at (1883) x 5,000 oz = 9,415,000 oz to which we add the difference between the open interest for the front month of March (690) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the March contract month:
1883 (notices served so far) + { OI for front month of March( 690) -number of notices served upon today (0} x 5000 oz = 12,875,000 oz standing for the March contract month.
we neither gained nor lost any silver ounces standing in this March delivery month.
for those wishing to see the rest of data today see:
http://www.harveyorgan.wordpress.com orhttp://www.harveyorganblog.com
end
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.
***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:
i) demand from paper gold shareholders
ii) demand from the bankers who then redeem for gold to send this gold onto China
vs no sellers of GLD paper.
And now the Gold inventory at the GLD:
March 17.2015: no change in gold inventory at the GLD/Inventory 750.67 tonnes
March 16/no change in gold inventory at the GLD/Inventory 750.67 tonnes
March 13/ we had a small change in gold inventory at the GLD (small withdrawal/probably to pay for fees)/Inventory at 750.67 tonnes
March 12.we had a withdrawal of 2.09 tonnes of gold at the GLD/Inventory at 750.95 tonnes
March 11.2015: no changes in gold inventory at the GLD/Inventory at 753.04 tonnes
March 10 no report on the GLD tonight/computer down/inventory remains 753.04 tonnes
March 9/ we had another huge withdrawal of 3.38 tonnes of gold from the GLD, no doubt heading for Shanghai/Inventory 753.04 tonnes
March 6/we had a huge withdrawal of 4.48 tonnes of gold from the GLD/inventory rests tonight at 756.32/Also HSBC is getting out of the gold business in London and is giving up all of its 7 vaults.
March 5 no change in gold inventory at the GLD/760.80 tonnnes
March 4/ no change/inventory 760.80 tonnes
March 3 we had another 2.69 tonnes of gold withdrawn from the GLD. Inventory is now 760.80 tonnes.
March 2 we had 7.76 tonnes of withdrawal from the GLD today and this physical gold landed in Shanghai/Inventory 763.49 tonnes
March 17/2015 / no change from Friday/Inventory at 750.67 tonnes
inventory: 750.67 tonnes.
The registered vaults at the GLD will eventually become a crime scene as real physical gold departs for eastern shores leaving behind paper obligations to the remaining shareholders. There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat (same banks).
GLD : 750.67 tonnes.
end
And now for silver (SLV):
March 17/ no change in silver inventory/327.332 million oz
March 16/no change in silver inventory/327.332 million oz
March 13.2015: no change in silver inventory/327.332 million oz
March 12: no changes in silver inventory/327.332 million oz
March 11/no changes in silver inventory/327.332 million oz
March 10/ no change in silver inventory/327.332 million oz
March 9/ no change in silver inventory at the SLV/327.332 million oz
March 6: huge addition of 1.34 million oz of silver into the SLV/Inventory 727.332 million oz
March 5 no change in inventory/725.992 million oz
March 4 a slight reduction of 126,000 oz of silver/SLV inventory at 725.992 (probably to pay for fees)
March 3 a small deposit of 328,000 oz of silver into the SLV/Inventory at 726.118 million oz.
March 2/ no change in silver inventory tonight; 725.734 million oz
Feb 27.2015 no change in silver inventory tonight: 725.734 million oz
Feb 26. no change in silver inventory at the SLV/Inventory at 725.734 million oz
Feb 25. no changes in silver inventory/SLV inventory at 725.734 million oz
March 17/2015 no change in silver inventory at the SLV/ SLV inventory rests tonight at 327.332 million oz
end
And now for our premiums to NAV for the funds I follow:
Note: Sprott silver fund now for the first time into the negative to NAV
Sprott and Central Fund of Canada.
(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
Not available tonight
1. Central Fund of Canada: traded at Negative 9.2% percent to NAV in usa funds and Negative 9.4% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.7%
Percentage of fund in silver:37.9%
cash .4%
( March 17/2015)
Sprott gold fund finally rising in NAV
2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.47%!!!!! NAV (March 17/2015)
3. Sprott gold fund (PHYS): premium to NAV falls to -.31% to NAV(March 17 /2015)
Note: Sprott silver trust back into positive territory at +1.47%.
Sprott physical gold trust is back into negative territory at -.31%
Central fund of Canada’s is still in jail.
end
And now for your more important physical gold/silver stories:
Gold and silver trading early this morning
(courtesy Mark O’Byrne)
off for St Patrick’s day:
Happy Saint Patrick’s Day
Wishing you health, wealth, good luck and good fun this Saint Patrick’s Day from all the team in GoldCore
May your home be filled with laughter
May your pockets be filled with gold
And may you have all the happiness
Your heart can hold
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end
(courtesy Koos Jansen/GATA)
Koos Jansen: Yuan’s inclusion in SDRs likely will carry gold with it
Submitted by cpowell on Tue, 2015-03-17 00:04. Section: Daily Dispatches
8a SGT Tuesday, March 17, 2015
Dear Friend of GATA and Gold:
Drawing upon official statements and comments, Bullion Star market analyst and GATA consultant Koos Jansen writes today that the Chinese yuan’s imminent inclusion in the International Monetary Fund’s calculation of special drawing rights will probably carry gold into the SDR too. Jansen’s commentary is headlined “China, Gold, SDRs, and the Future of the International Monetary System” and it’s posted at Bullion Star here:
https://www.bullionstar.com/blogs/koos-jansen/china-gold-sdrs-and-the-fu…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
(courtesy John Embry/Kingworldnews/Eric King/GATA)
Declining U.S. economy doesn’t support soaring dollar, Embry tells KWN
Submitted by cpowell on Mon, 2015-03-16 23:51. Section: Daily Dispatches
7:45a SGT Tuesday, March 17, 2015
Dear Friend of GATA and Gold:
Why is the U.S. dollar soaring while the U.S. economy is crashing with the world economy and even some responsible people are starting to notice that the hype about a strengthening economy is wrong? That’s the question suggested by King World News’ latest interview with Sprott Asset Management’s John Embry, which is excerpted here:
http://kingworldnews.com/50-year-veteran-on-gold-and-how-bad-things-have…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
It seems that even the closest of USA allies are defying the Americans and joining the China led development bank. It looks like Australia is the next country to join.
Following is the story from London’s financial times and below we have the story from Zero hedge
first:
(courtesy London’s Financial times/George Parker/GATA)
Europeans defy U.S. to join China-led development bank; Australia may be next
Submitted by cpowell on Tue, 2015-03-17 05:55. Section: Daily Dispatches
By George Parker, Anne-Sylvaine Chassany, and Geoff Dyer
Financial Times, London
Monday, March 16, 2015
France, Germany, and Italy have all agreed to follow Britain’s lead and join a China-led international development bank, according to European officials, delivering a blow to US efforts to keep leading Western countries out of the new institution.
The decision by the three European governments comes after Britain announced last week that it would join the $50 billion Asian Infrastructure Investment Bank, a potential rival to the Washington-based World Bank.
Australia, a key U.S. ally in the Asia-Pacific region that had come under pressure from Washington to stay out of the new bank, has also said that it will now rethink that position. …
… For the remainder of the report:
http://www.ft.com/intl/cms/s/0/0655b342-cc29-11e4-beca-00144feab7de.html
end
Does China have an option?
As an addendum to yesterday’s writing, today we should tie together the new alliances and what appears to be Western defections toward the East. Just overnight, Australia also applied for membership to the AIIB, a U.S. rebuke is sure to follow, who is next? With this in mind, it is my belief the Chinese will be the key player in the gold market and the “pricing” of gold in the future. In turn they will gain even more financial strength because of the massive amounts they have already accumulated. As a side note, do you believe it is by mistake China is now the largest gold producer in the world? I think not. I will give you my theory first, then work my way toward supporting it.
Very simply, I believe China will fare poorly when the paper and derivatives markets around the world collapse. They have a very over levered real estate market to which many of their banks and “shadow banks” have lent to and have exposure. Their real economy and manufacturing will suffer as global demand drops further because of economic depression. It won’t be “pretty” but they will survive and eventually thrive. Why? Because undoubtedly, China is working toward the yuan becoming “a” reserve currency and given time, “the” reserve currency. My theory is this, China, even though they are probably willing and plan to eventually re mark gold much higher than where it trades today, will be FORCED to mark gold higher to re liquefy or re capitalize their banking system. This is not groundbreaking thought as gold has been marked higher in past monetary episodes in order to re capitalize treasuries and banking systems. It also had the side effects of generating some inflation and kick starting the economy. It is in a parallel fashion to this which I believe China will ultimately be forced into.
As you know, Britain (and Australia) has applied to become a charter member of the AIIB. No matter what is given as reason, this is simply their recognition of where the future is headed and the Brits wanting to be allied with the winner in a “if you can’t beat ‘em, join ‘em” type of move. Britain must first clear the hurdle of being accepted. China has introduced them but they must be ratified by the various founding countries. I find this intriguing because of the potential motivations for either a yes or a no vote. Does Britain bring much to the table other than reputation or the fact they are the number one U.S. ally changing their allegiance? If Britain is accepted, they will merely be a “feather” in the East’s cap. A no vote would be quite embarrassing because Britain has now shown their hand and intent, …only deemed to be “not good enough”? A very bad place to be if you asked me.
Why am I even bringing Britain’s application up? Because I believe it is a timing thing. The East, obviously led by China is beginning a new “fix” to challenge London’s and they are also beginning a new cash and carry metals exchange which will challenge COMEX and LBMA. Maybe “challenge” is the wrong the word. Better said would be to make these two exchanges “obsolete”. What will happen if (when) China’s physical exchange prices metal higher than the paper exchanges? “Arbitrage” will happen and the Western vaults will be cleaned out, that’s what! I hate to state the obvious but how do you have a “business”, in this case an exchange, if you have no product? For Britain to make application now and against direct “orders” from the U.S., at this point in time, tells me something is changing and it may now be coming to a head.
Whether or not the timing of the East beginning new exchanges and pricing, along with their own alternate clearing system and global bank is “cause” can be debated. Have they timed it with the demise of the overleveraged system of the West? Or will the alternative systems themselves pull the rug out from under the dollar and all that goes with it? It really does not matter. As I wrote above, China will not go unscathed and will be defaulted on in many instances and will also watch as much of their internal leverage defaults.
It is the nature of defaults that leads me to my theory of China revaluing gold higher whether they want to or not. It will be their natural, if not ONLY choice. I don’t believe they will have any other choice even though they have been preparing for many years, simply because they have played and are playing in the paper game. They have built a manufacturing base the Rockefellers, Vanderbilts and Fords would marvel at in both size and technology. They have built new infrastructure and even new cities preparing for “something”. During this “build out”, China has also amassed more gold than the U.S. even claims to have. It is my contention China has done all of this because they understand the end game. They understand the dollar game fully. They have known ever since and even before 1971 the rules were “never pay” or settle as the key component.
Think this through, clearly default of nearly everything paper is coming. If you don’t agree with this or cannot see it then my theory is useless to you. If you can see this, and the Chinese surely do based on their actions, what is the plan? Just as has always been done in the past many times, their “treasury” will require a MUCH higher gold price to rebuild their base from. With much of everything paper defaulted on (and including “to” the Chinese), there will by necessity need to be a restart button pushed. China’s gold will serve this function. As with Exter’s pyramid I recently showed you, a new pyramid will begin to build …using China’s gold as a foundation.
Revaluing their gold hoard has many advantages and zero disadvantages as I see it. Their treasury coffers will swell, their currency will begin to enjoy the fruits of reserve status and along with this, they will enjoy new found power. We will witness not only the greatest transfer of wealth in all of history, along with this will come a transfer of power, financial power. When China revalues gold higher, this will serve several functions beyond the obvious of devaluing their currency against it. For those countries not holding gold, a very long and arduous financial time will follow. By marking the price up, they will be making any accumulation or “catch up” plans very difficult. Another aspect is from the very micro standpoint of gold being priced too high for the average citizen to buy much if any. For China to do this makes perfect sense. They take the lead and the power while making it difficult for anyone to catch up to them for possibly several hundred years …which is exactly how they think. The West has clearly forgotten the old saying about gold and those making the rules, I believe China will be forced to invoke it! Regards, Bill Holter
And now for the important paper stories for today:
Early Tuesday morning trading from Europe/Asia
1. Stocks generally higher on major Chinese bourses (only Hang Sang lower)/yen rises to 121.23
1b Chinese yuan vs USA dollar/yuan strengthens to 6.2492
2 Nikkei up 190.04 or 0.99%
3. Europe stocks mostly in the red/USA dollar index down to 99.59/Euro rises to 1.0603
3b Japane 10 year bond yield .42% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 121.23/
3c Nikkei still above 19,000
3d USA/Yen rate now above 121 barrier this morning
3e WTI 43.06 Brent 53.00
3f Gold down/Yen slightly up
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil down for both WTI and Brent this morning.
3i European bond buying continues to push yields lower on all fronts in the EMU
Except Greece which sees its 2 year rate rise to 20.12%/Greek stocks down again by .50% today/expect continual bank runs on Greek banks.
3j Greek 10 year bond yield: 10.79% (up slightly by 1 basis point in yield)
Greece needs another 2 million euros raiding their pension fund.
3k Gold at 1154.00 dollars/silver $15.56
3l USA vs Russian rouble; (Russian rouble down up 1/2 rouble/dollar in value) 61.69 despite lower oil prices
3m oil into the 43 dollar handle for WTI and 53 handle for Brent
3n Higher foreign deposits out of China sees hugh risk of outflows and a currency depreciation. This scan spell financial disaster for the rest of the world/China may be forced to do QE!!
30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF
3p Britain’s serious fraud squad investigating the Bank of England
3r the 7 year German bund still is in negative territory/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.
3s German confidence ZEW number lower than expected.
3t Russian tensions escalate (see below)
3u World awaits the USA Fed decision on “patience” to see if wording is removed
4. USA 10 year treasury bond at 2.05% early this morning. Thirty year rate well below 3% at 2.62%/yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
S&P Futures Weak As Fed Meeting Begins, 10 Year Yield Drops; Oil Back Under $43
Following yesterday’s inexplicable ramp in stocks, which perhaps was driven by the collapse in oil (which sent energy companies higher because a 30x energy forward PE is cheap), and by the latest battery of disappointing economic data which made it less likely the Fed will proceed with a tightening move, overnight futures have given up a portion of the gains, and were trading down 0.3% at last check. And yet, if yesterday’s weakness was driven by USD weakness, today’s jump in the EURUSD above 1.06 (on absolutely disastrous German ZEW investor index print) is now somehow responsible for risk offness? And, adding confusion to insult, the 10 Y is down to 2.05% and in danger of re-entering a 1% handle. Sadly, nothing makes sense any more and today’s conclave of central planners in the Marriner Eccles building ahead of tomorrow’s 2pm FOMC “impatient” announcement isn’t going to make it any better.
But it isn’t just the Fed – as expected, the BoJ stood pat on their existing monetary policy with Kiuchi the only dissenter. In terms of the main takeaway, the BoJ warned that Japanese CPI could reside at 0.0% for the time being due to lower energy prices but said that additional easing was not required for now. Nonetheless, the BoJ will continue to examine ongoing risks to the economy and expect their 2% CPI threshold to be reached during 2015/16 fiscal year. As such, little market reaction was seen with the Nikkei 225 (+0.99%) holding on to its opening gains stemming from the positive Wall Street close alongside yesterday’s broadly weaker USD. Elsewhere, the Shanghai Comp. (+0.5%) has pulled off its best levels heading into the European open despite originally continuing the trend seen yesterday amid ongoing expectations for further easing.
European equities trade mostly lower by around 0.2-0.5% in a pullback of yesterday’s substantial gains, with the exception of the FTSE 100 which is trading higher by around 0.5%. UK stocks have been led higher by a rebound in energy names following yesterday’s notable underperformance despite both WTI and Brent actually once again trading lower this morning. One thing to note for UK energy names is that they are set to benefit from tomorrow’s UK budget with Chancellor Osborne set to unveil a new investment allowance in an attempt to counter CAPEX reductions. Fixed income markets have failed to gain any meaningful direction with newsflow relatively light thus far and a relatively mixed German ZEW and in-line Eurozone inflation report. Gilts outperform but merely on a catch up basis given the moves higher seen in USTs after the Gilt close yesterday. As was the case yesterday, newswires are reporting that Russian troops have been placed on full alert in the Baltic region. However, this is due to ongoing training drills and as was the case last week.
FX markets have once again been largely swayed by fluctuations in the USD-index which moved lower alongside the European open in a similar vein to yesterday ahead of the FOMC meeting. Despite the USD-index pulling off its worst levels in recent trade, EUR trades higher and AUD has pared its overnight losses after the RBA minutes revealed the central bank had considered another rate cut before opting to instead adopt a data dependent approach. Nonetheless, GBP has bucked the trend as political concerns heading into the UK general election has seen GBP/USD move back below 1.4800 ahead of tomorrow’s UK budget release. Finally, USD/JPY has traded in a relatively tight range with a large (750mln) option expiry at 121.25-30 providing some magnetism for price action.
In the energy complex, both Brent and WTI have failed to be granted any reprieve from the weaker USD with ongoing concerns about the glut of global supply continuing to weigh on sentiment for the sector. Elsewhere, spot gold and silver have traded in a relatively tentative manner ahead of tomorrow’s FOMC meeting, while platinum remains the worst performing precious metal of 2015 amid a decline in Chinese jewellery demand to reach its lowest level since July 2009.
And moments ago, this:
NY CRUDE DROPS BELOW $43/BBL; FALLS 90C OR 2.1% TO $42.98/BBL
In summary: European stocks near session low, paring earlier gains, while Asian shares rise. U.S. stock index futures drop, euro strengthens against the dollar. Fed begins a two-day meeting today. German ZEW March investor index misses estimates. U.K. plans major tax cut for North Sea. The U.K. and Swiss markets are the best-performing larger bourses, the Italian and German the worse. The euro is stronger against the dollar. U.S. housing starts, building permits due later.
Market Wrap
S&P 500 futures down 0.3% to 2063
Stoxx 600 down 0.3% to 398.8
US 10Yr yield down 2bps to 2.05%
German 10Yr yield down 1bps to 0.27%
MSCI Asia Pacific up 0.8% to 145
Gold spot up 0.1% to $1155.6/oz
Eurostoxx 50 -0.2%, FTSE 100 +0.5%, CAC 40 -0%, DAX -0.6%, IBEX -0.2%, FTSEMIB -0.6%, SMI +0.1%
Asian stocks rise with the Nikkei outperforming and the Kospi underperforming
MSCI Asia Pacific up 0.8% to 145; Nikkei 225 up 1%, Hang Seng down 0.2%, Kospi up 2.1%, Shanghai Composite up 1.6%, ASX up 0.8%, Sensex up 1.1%
Euro up 0.38% to $1.0608
Dollar Index down 0.16% to 99.45
Italian 10Yr yield up 1bps to 1.19%
Spanish 10Yr yield up 1bps to 1.19%
French 10Yr yield down 0bps to 0.51%
S&P GSCI Index down 0.4% to 388.3
Brent Futures down 0.6% to $53.6/bbl, WTI Futures down 1.1% to $43.4/bbl
LME 3m Copper down 1.5% to $5758/MT
LME 3m Nickel down 1.2% to $13760/MT
Wheat futures up 0% to 514.3 USd/bu
Bulletin Headline Summary from RanSquawk and Bloomberg
The FTSE 100 outperforms amid a pullback in energy names despite Brent and WTI once again trading lower amid ongoing supply concerns
USD-index is slightly weaker ahead of the FOMC, lifting most of its major counterparts including AUD which has recovered from a more dovish than expected RBA minutes release
Looking ahead, today sees the release of US housing starts, building permits and DoE inventories
Treasuries gain, led by long end, as crude fell for a sixth day; Fed meeting begins today, with statement, updated SEP and Yellen press conference tomorrow.
Fed seen removing “patient” from statement as it moves close to raising interest rates, analysts say
Iran could raise oil exports by 1m barrels/day without international sanctions, its oil minister said as talks resumed with the U.S. over the nation’s nuclear program
Austria’s decision to burn bondholders of a failed state bank may mean almost EU1.3t of European debt once deemed risk-free now comes with a hazard warning
BOJ’s Kuroda said he couldn’t rule out the risk of consumer prices falling below zero after the central bank on Tuesday maintained record monetary stimulus
Germany’s ZEW index of investor confidence rose to 54.8 in March from 53 in February, below 59.4 median estimate in a Bloomberg survey
Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than EU2b in debt payments Friday; payments due include interest on a swap originally arranged by Goldman, according to a person familiar
While baseline scenario is for Greece to ultimately stay in euro zone, a “big enough” misstep may force exit, Morgan Stanley economists incl. Daniele Antonucci write in client note
Sovereign 10Y yields mostly lower; Italy, Portugal and Spain higher. Asian stocks gain, European stocks, U.S. equity- index futures fall. Crude and copper slide, gold steady
Central Banks
FOMC begins two-day meeting
DB’s Jim Reid Concludes the Overnight Recap
The European bond bull market is pausing for breath at the moment which will probably be a relief for the ECB as they would surely rather not have markets too predictable and their job made ever harder. However attention has shifted to the US for the moment with yesterday seeing a reversal of recent trends as we go into the 2-day FOMC meeting. The US Dollar had a rare down day with the broader DXY finishing 0.72% lower. In fact, out of 52 trading days so far, the DXY has closed firmer in 35 of them. US equity markets meanwhile recovered some of Friday’s losses closing +1.35% higher and helped in part by a weaker set of macro data releases which lent support to the doves. It was a better day for Treasuries too. 10y yields closed 4.2bps lower at 2.072% whilst longer dated 30y yields ended 5.4bps lower at 2.64%.
Onto the weaker US data, Industrial production (+0.1% mom vs. +0.2% expected) printed below consensus while manufacturing production fared little better, dropping -0.2% mom which was below expectations of a flat reading. Capacity utilization dropped 0.2% to 78.9% and also came in below expectations of 79.5% for February. The reading was in fact also the lowest since February last year. Elsewhere the NAHB housing market index dropped 2pts during March to 53 (and below market expectations of 56). Surely the Fed have to acknowledge the uncertainty at the moment even if they think it is temporary.
Despite a better day for risk assets in the US, and a stronger Euro, there was no let up for European bourses which continue to march higher. The Stoxx 600 finished +0.90% to break the 400 level and finish just shy of the highs in September 2000 whilst the DAX finished 2.24% higher and closed above 12,000 for the first time on record. The Euro recovered a touch to finish +0.69% versus the US Dollar at $1.057. Bond yields on the other hand drifted higher. 10y yields in Italy (+3.2bps), Spain (+2.8bps) and Portugal (+0.9bps) were all wider and Bunds finished around 2bps higher at 0.277%. In fact, 10y yields in Spain and Italy are now 12bps and 15bps off Thursday’s intraday lows in yield and Bunds are some 10bps higher over the same period.
Yesterday we got the news out of the ECB that the central bank had settled €9.75bn of public-sector bond purchases last week. It’s difficult to assess the current run rate with regards to the monthly target with Bloomberg noting that the statement could be understated given it excludes the bonds which have not yet settled.
ECB President Draghi was also in the news yesterday and was reported as playing up the Euro-area recovery, saying that ‘most indicators suggest a sustained recovery is taking hold’ and that ‘confidence among firms and consumers is rising, growth forecasts have been revised upwards and bank lending is improving on both the demand and supply sides’ (Reuters). Draghi did interestingly however comment that Euro-area countries have yet to converge sufficiently and as a result have not yet dispelled doubts about the bloc’s cohesion. The President instead proposed for more integration between member states, specifically saying that ‘there must be a quantum leap in institutional convergence’ in order to ‘move from a system of rules and guidelines for national economic policy making to a system of further sovereignty sharing within common institutions’.
Just wrapping up yesterday’s price action, it was another weak day for oil markets as both WTI (-2.14%) and Brent (-1.95%) tumbled for the third consecutive day to $43.88/bbl and $53.94/bbl respectively. Revisiting the US HY sector and the energy component in particular, it’s interesting to see that cash spreads have actually tightened 30bps so far this year. WTI and Brent meanwhile have tumbled 18% and 7% respectively over the same period. The broader US HY index has tightened some 32bps YTD. Clearly the resilience in US HY energy names is in stark contrast to last year. Over the period from when Brent fell from $110/bbl in June to $60/bbl at the end of 2014, US HY energy cash spreads widened 426bps – the move even more exaggerated if we use the early December wides in spread. So a very different story so far this year but the sharpness of the recent leg lower in Oil might start to test the HY energy recovery. It also is likely to prolong the low headline inflation story for longer which has obvious policy implications.
Refreshing our screens this morning, bourses are largely in the green in Asia following the US lead. Indeed the Nikkei (+1.13%), Hang Seng, (+0.34%), Shanghai Composite (+1.33%) and Kospi (+1.77%) are all trading firmer as we go to print. There was little in the way of surprises out of this morning’s BoJ meeting with no changes to the scale of asset purchases.
Elsewhere in the region, our China economist Zhiwei Zhang noted yesterday that the latest batch of fiscal data from the Ministry of Finance for the first two months of the year showed that the fiscal slide is worse than expected. The national budgetary income grew by just +1.7% yoy versus +8.6% in the same period last year. Zhiwei noted that central budgetary income was also weak whilst the various tax categories were all down. He believes that the government will start easing policies in April with this shift likely to happen on both the fiscal and monetary sides. In terms of the fiscal side, expectations are for more spending through both the central government as well as the policy banks. On the monetary side meanwhile, Zhiwei expects a RRR cut of 50bps in early April when March economic data becomes available and also expects an interest rate cut in May. The question remains how the government will fill the financing gap and avoid a fiscal-driven hard-landing.
Taking a look at today’s calendar, focus this morning in the European time-zone will be on the ZEW survey out of both Germany and the Euro-area. The final February CPI reading for the Euro-area is also due with the market looking for a -0.3% yoy headline reading and +0.6% yoy core print. Aside from the obvious focus on the start of the FOMC meeting this afternoon, housing starts and building permits for the US are also due. To close out the day I’ll be belting out Gold, True and Through the Barricades at the O2 arena and will be wondering where the years have gone!!
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Greece is now scrambling as they need more than 2 billion euros by the end of this week. This also includes interest on that famous swap with Goldman Sachs that allowed Greece to enter into the EMU. What is curious is that Greece wants to take Insurance deposits that are housed at the central bank of Greece and covert that into sovereign bonds. I have been told that World War III will break out if they force these companies to covert their euros into worthless sovereign bond:
(courtesy Bloomberg)
Greece Grabs Cash as More Than $2 Billion in Payouts Loom
(Bloomberg) — Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday.Unable to access bailout funding and locked out of capital markets, the government will outline emergency plans to parliament Tuesday to increase funding. Payments due March 20 include interest on a swap originally arranged by Goldman Sachs Group Inc., said a person familiar with the matter who asked not to be identified publicly discussing the derivative.Prime Minister Alexis Tsipras’s government is burning through cash while trying to get its creditors — euro area member states, the European Central Bank and the International Monetary Fund — to release more money from its 240 billion-euro bailout program. European governments have said they won’t disburse any more emergency loans unless the government in Athens implements a set of economic overhauls agreed last month, including pension and sales tax reform.
“As days go by, room for maneuver becomes ever smaller,” said Theodore Pelagidis, an Athens-based senior fellow at the Brookings Institution. “The impression given is that there’s no plan A or plan B. There’s nothing.”
The government’s plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday.
Ending Austerity
The government said March 14 it has a plan to “enhance its liquidity” and won’t have problems meeting payments for civil servants and retirees due just one week after the March 20th debt payments. Tsipras has pledged to meet the country’s obligations while at the same time ending austerity measures.
“None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work,” German Finance Minister Wolfgang Schaeuble said in Berlin Monday. Greek leaders are “lying to the population,” he said.
The government plans to auction 1 billion euros of treasury bills on March 18. As much as 60 percent of the auctioned amount can be tapped on top of that in non-competitive and second-day bids. The money will be used to roll over 1.6 billion euros of short-term notes due March 20.
The same day, Europe’s most indebted state is scheduled to repay about 350 million euros to the IMF, while interest due on four bonds held by the ECB total about 110 million euros.
Goldman Swap
The Goldman Sachs derivative, now held by the National Bank of Greece, masked the country’s growing debt when it was agreed in 2001, helping it meet European Union rules for entering the euro area. The interest payment adds to the country’s funding woes as the government misses budget targets and the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.
Spokesmen for the National Bank of Greece and Goldman Sachs declined to comment on the amount due for the swap, and the government didn’t respond to calls and text messages seeking comment.
Greece’s 2014 primary budget surplus was just 0.3 percent of gross domestic product, missing a target of 1.5 percent, according to preliminary data released Monday by the finance ministry.
Euclid Tsakalotos, Greece’s deputy foreign minister, said Monday that the ECB is partly to blame for Greece’s cash crunch. Tsipras and Finance Minister Yanis Varoufakis have asked on several occasions for creditors to allow more short-term notes to be issued and bought by Greek lenders to help the country meet obligations in the next weeks.
ECB Review
ECB President Mario Draghi has poured cold water on Greek demands, saying emergency funding facilities, which are keeping the country’s lenders afloat after a massive deposit outflow, can’t be used to tide over the government.
The ECB will review the liquidity position of Greek banks on March 19, the same day European Union leaders convene in Brussels. Tsipras may raise the issue of the country’s cash-flow problem in his first bilateral meeting with German Chancellor Angela Merkel on March 23.
“Vagueness from the Greek side continues and so does pressure from the euro area counterparts,” said Aristides Hatzis, associate professor of law and economics at the University of Athens. “The cat-and-mouse game is expected to continue until June.”
To contact the reporters on this story: Nikos Chrysoloras in Athens atnchrysoloras@bloomberg.net; Vassilis Karamanis in Athens atvkaramanis1@bloomberg.net; Christos Ziotis in Athens at cziotis@bloomberg.net
To contact the editors responsible for this story: Vidya Root at vroot@bloomberg.netChad Thomas, Celeste Perri
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Zero hedge weighs in on the above story:
(courtesy zero hedge)
Greece Faces Cash Crunch This Friday Without “Plan A Or Plan B”: What Happens Next
Greece’s day of reckoning may be fast approaching. Athens will have to pony up more than €2 billion in debt payments this Friday to the ECB, the IMF, and (get this) Goldman Sachs, for an interest payment on a derivative and it’s not entirely clear where the money will come from. On Wednesday, the government will vote on a “plan” to boost liquidity which includes tapping public funds and diverting bank bailout money. Here’sBloomberg:
Greece will begin debating measures to boost liquidity as the cash-starved country braces for more than 2 billion euros ($2.12 billion) in debt payments Friday…
The government’s revenue-boosting plan includes eliminating fines on those who submit overdue taxes by March 27 to encourage payment, helping cover salaries and pensions due at the end of the month. The bill also requires pension funds and public entities to invest reserves held at the Bank of Greece in government securities and repurchase agreements, and transfers 556 million euros from the country’s bank recapitalization fund to the state. A vote on the measures is scheduled for Wednesday…
The Goldman Sachs derivative, now held by the National Bank of Greece, masked the country’s growing debt when it was agreed in 2001, helping it meet European Union rules for entering the euro area. The interest payment adds to the country’s funding woes as the government misses budget targets and the ECB refuses to allow Greek banks to keep the country afloat with additional short-term debt.
Despite government claims that it can meet its obligations, outside observers aren’t so sure. German FinMin Wolfgang Schaeuble for instance, can’t find anyone who can explain it:
“None of my colleagues, or anyone in the international institutions, can tell me how this is supposed to work.”
Meanwhile, one senior fellow at the Brookings Institution suggests Athens is winging it entirely at this point:
“The impression given is that there’s no plan A or plan B. There’s nothing.”
With the situation deteriorating rapidly, the sell side is back to drawing up Grexit plans. For their part, Morgan Stanley sees a 60% chance of either a euro exit or what the bank is calling a “staycation,” which basically means that the situation is so convoluted that no one can figure it out leading to the imposition of capital controls and a painful prolonging of the inevitable. Here’s more from MS:
Grexit – what’s the probability?
We recap the three alternative scenarios worth exploring:
1. Euro stay (40% probability): This scenario would be the result of political compromise. Basically, of the ‘impossible trinity’ that Syriza wants (stay in the euro; be in power; and undo the bailout programme), what gives is that the Greek government doesn’t undo the bailout programme. We assume that it recommits to implementing a slightly less demanding package of measures in agreement with the official lenders, and prospects of somewhat less austerity, extra maturity extensions and interest rate reductions on the EU loans, as well as ECB QE, help find a compromise (see here). This is still our base case but, compared to our previous assessment of 55%, we think that the chances of this outcome have diminished, given the inherent difficulties in finding a middle-ground solution, mostly given Greece’s political constraints domestically, and Europe has little appetite for further slippages.
2. Euro exit (25% probability): This would happen if the lack of a Greece-Troika compromise led to bitter negotiations, then a worsening in market reaction, negotiations ultimately failing and Greek banks being cut off from ECB funding. It could also happen if the EU perceived low contagion risk and/or viewed the political precedent of a Greek euro exit as not that bad – in which case Greece would be ‘let go’. The chances of this outcome playing out have not increased, in our view; yet they haven’t diminished either. While this is not our base case, we believe that the probability of a misstep remains substantial – given an unstable economic, bank deposit and sovereign funding situation – and may well lead to an exit.
3. Euro staycation (35% probability): This is an intermediate scenario where no
compromise is reached over a 3-6-month horizon. We presume capital controls would be introduced to limit money outflows, and Greece, like Cyprus, would effectively no longer be a full member of the eurozone, even though formally it would stay within the currency union. Full euro membership would eventually be restored once/if all capital controls were lifted. This scenario, after some time, could evolve into either of the other two. Should this happen, we’d see a 60% probability that an exit might follow, taking a 12-18 month view, and a 40% probability that capital controls get lifted. Further damage to the economy, banking system and confidence may well lead to this outcome, especially if accompanied by policy mistakes.
Endgame probabilities: Even though it’s beyond the scope of this note, the ‘fully computed’ probabilities – i.e., taking into account that staycation, in the end, either becomes exit or stay in the medium term – suggest