Good evening Ladies and Gentlemen:
Here are the following closes for gold and silver today:
Gold: $1169.10 up $17.70 (comex closing time)
Silver: $16.10 up 58 cents (comex closing time)
In the access market 5:15 pm
Gold $1172.00
Silver: $16.13
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 3 notices for 15,000 oz .
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.90 tonnes for a loss of 57 tonnes over that period. Lately the removals have been rising!
In silver, the open interest rose by 599 contracts as yesterday’s silver price was down by 4 cents. The total silver OI continues to remain extremely high with today’s reading at 179,123 contracts. The front month of March fell by 118 contracts to 574 contracts. We are now at a multi year high in the total OI complex despite a record low price. This dichotomy has been happening now for quite a while and defies logic.What is also strange today again 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 3 notices served upon for 15,000 oz.
In gold we had a huge rise in OI as gold was up by $3.40 yesterday. The total comex gold OI rests tonight at 430,737 for a gain of 599 contracts. Today, surprisingly we again had 0 notices served upon for nil oz.
Today, we had no changes at the GLD/ inventory at the GLD/Inventory rests at 749.77 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, Another increase in silver OI /silver OI at multi year highs and yet silver is extremely low in price. Gold OI again rises by close to 600 contracts (harvey)
2,Greece scrambles to raise 2 billion euros by tomorrow. The IMF basically is giving up on these guys. The European Minister is basically calling for capital controls but this can only be orchestrated by Greece itself. Today Greece raided the utilities doing a repo for their cash. We wish the utilities all the luck in the world.
3.Yesterday, the big news was the dovish report from the FOMC/gold and commodities rose with the Euro and just about all currencies rising against the dollar. Today, that reversed with the Euro tumbling along with the Canadian dollar, and the British pound
(zero hedge)
4. European sovereign bond risks rise (yields rise) due to potential GREXIT:
(Bloomberg/zero hedge)
5. Saber rattling between Russian and the USA
(zero hedge)
6.More countries are leaving the USA fold, by joining the new Chinese development bank. Today, South Korea and Luxembourg are joining.
(zero hedge)
7.Oil retreats in price due to oversupply. Jim Quinn reports that shale producers are getting 37 USA dollar per barrel and none are making any money
(zero hedge/Jim Quinn/Burning Platform)
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 599 contracts from 429,738 up to 430,337 as gold was up by $3.40 yesterday (at the comex close). We are now in the contract month of March which saw it’s OI rose to 125 for a gain of 15 contracts. We had 2 notices filed upon yesterday so we gained 13 gold contracts or additional 1300 oz will stand for delivery in this delivery month of March. The next big active delivery month is April and here the OI fell by 6,234 contracts down to 202,545. We have less than two weeks before first day notice for the April gold contract month. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 90,316. (Where on earth are the high frequency boys?). The confirmed volume on yesterday ( which includes the volume during regular business hours + access market sales the previous day) was good at 226,989 contracts. Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose by 599 contracts from 178,524 up to 179,123 despite the fact that silver was down by 4 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 118 contracts falling to 574. We had 118 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 18,714 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 42,143 contracts which is good in volume. We had 3 notices filed for 15,000 oz today.
March initial standings
March 19.2015
Gold
Ounces
Withdrawals from Dealers Inventory in oz
nil
Withdrawals from Customer Inventory in oz
64,609.286 oz (JPM)
Deposits to the Dealer Inventory in oz
nil
Deposits to the Customer Inventory, in oz
32,150.000 (1000 Kilobars) Scotia
No of oz served (contracts) today
0 contracts (nil oz)
No of oz to be served (notices)
125 contracts (12,500 oz)
Total monthly oz gold served (contracts) so far this month
8 contracts(800 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
559,020.3 oz
Today, we had 0 dealer transaction
total Dealer withdrawals: nil oz
we had 0 dealer deposit
total dealer deposit: nil oz
we had 1 customer withdrawals
i) Out of JPM: 64,609.286 oz
total customer withdrawal: 64,609.286 oz
we had 1 customer deposits:
i) Into Scotia: 32,150.000 oz
total customer deposits; 32,150.000 oz
We had 1 adjustment
i) Out of Delaware:
5,698.817 oz was adjusted out of the dealer and this landed into the customer account of Delaware:
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 (8) x 100 oz or 800 oz , to which we add the difference between the open interest for the front month of March (125) 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 (8) x 100 oz or ounces + {OI for the front month (125) – the number of notices served upon today (0) x 100 oz} = 13,300 oz or .4136 tonnes
we gained 1300 additional 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) = 7.936 million oz. (246.84) tonnes)
Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 56.0 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 19 2015:
Silver
Ounces
Withdrawals from Dealers Inventory
nil oz
Withdrawals from Customer Inventory
409,459.98 oz (Brinks)
Deposits to the Dealer Inventory
nil
Deposits to the Customer Inventory
nil
No of oz served (contracts)
3 contracts (15,000 oz)
No of oz to be served (notices)
571 contracts (2,855,000)
Total monthly oz silver served (contracts)
2004 contracts (10,020,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this month
4,798,774.8 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 0 customer deposits:
total customer deposit: nil oz
We had 1 customer withdrawals:
i) Out of Brinks: 409,459.98 oz
total withdrawals; 409,459.98 oz
we had 0 adjustment
Total dealer inventory: 70.021 million oz
Total of all silver inventory (dealer and customer) 176.415 million oz
.
The total number of notices filed today is represented by 3 contracts for 15,000 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 (2004) x 5,000 oz = 10,020,000 oz to which we add the difference between the open interest for the front month of March (574) and the number of notices served upon today (3) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the March contract month:
2004 (notices served so far) + { OI for front month of March(574) -number of notices served upon today (3} 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 19/we had no changes in inventory at the GLD/Inventory 749.77 tonnes
March 18/ we had a withdrawal of .9 tonnes of gold from the GLD/Inventory at 749.77 tonnes
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 19/2015 / we had no changes at GLD/Inventory at 749.77 tonnes
inventory: 749.77 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 : 749.77 tonnes.
end
And now for silver (SLV):
March 19/ no change in silver inventory/327.332 million oz
March 18/ no change in silver inventory/327.332 million oz
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 19/2015 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 7.2% percent to NAV in usa funds and Negative 7.3% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.5%
Percentage of fund in silver:38.0%
cash .5%
( March 19/2015)
Sprott gold fund finally rising in NAV
2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.22%!!!!! NAV (March 19/2015)
3. Sprott gold fund (PHYS): premium to NAV falls to -.38% to NAV(March 19 /2015)
Note: Sprott silver trust back into positive territory at +1.22%.
Sprott physical gold trust is back into negative territory at -38%
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)
Gold Surges – Fed Loses “Patience” and Signals Loose Monetary Policies to Continue
By Mark O’Byrne March 19, 2015 0 Comments
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- Gold rose over 2% – Fed signals ultra loose monetary policies to continue
- Fed dampens expectation of a rate hike in June
- Yellen no longer “patient” – notes weakness in recent US economic data
- Fed knows that fragile, debt laden U.S. economy cannot handle higher rates
- Despite recent dollar strength, dollar vulnerable in long term
- Sole reserve currency status threatened in currency wars
Gold rose sharply following yesterday’s Fed announcement in which it was indicated that the Fed are unlikely to raise rates in June – although the possibility was not ruled out – due to the poorer economic data that has been emerging this year.
Gold rose after Fed Chair Yellen said that economic growth had “moderated somewhat” which means that ultra loose monetary policies look set to continue. The Federal Reserve dropped the word “patience” from its policy statement, stoking expectations for a mid-year rise in U.S. interest rates.
Many analysts regard this as further evidence that the Fed is caught in a bind. It needs to tighten monetary policy in order to rein in the developing bubbles in stock, bond and certain property markets. Stocks are seeing “irrational exuberance” once again and valuations surging despite declining earnings and dividends. Earnings and dividends are not likely to be improved given the weak economic data emerging from the U.S..
On the other hand, raising rates could cause the dollar to surge even higher in the short term, further undermining U.S. exports and the jobs market with a knock on effect on consumer confidence.
What is yet to be appreciated by most analysts is that it is unlikely that the massively over-leveraged and debt saturated financial system can weather increases in interest rates.
Global debt has ballooned since the 2008 crisis – itself a product of gargantuan debt. If consumers, investors, banks and other financial institutions are forced to service their debts at higher interest rates it will likely cause a new debt crisis and contagion.
Most likely the Fed will continue suggesting an imminent rate hike while plodding along as long as it can. But at some point rates will rise or the Fed will be overwhelmed when it finally becomes clear that they are reacting to events and are no longer in control of monetary policy.
Meanwhile, the dollar’s status as the world’s reserve currency continues to be undermined. Now, even its UK and European allies are beginning to adapt a more international approach to monetary affairs and not slavishly following Washington’s diktats.
Britain recently joined China in establishing a new infrastructure bank – the Asian Infrastructure Investment Bank (AIIB) – and is now being joined by France, Germany and Italy.
This new bank – which along with the BRICS bank will rival the U.S. dominated IMF and World Bank system – will not lend exclusively in dollars and will likely undermine the status of the dollar as sole reserve currency.
There has been much negative comment of gold in the financial sphere despite the fact that gold has been protecting investors in the Euro zone and in terms of other currencies gold has seen slight losses or has been thriving.
In dollar terms gold is marginally lower in the past year. Most currencies are lower than the dollar this year. But the undue status of the dollar as safe haven reserve currency is growing more questionable as we move from a uni-polar U.S. dominated world to a multi-polar world with an increasingly powerful China, India and Asia.
A new international currency order is emerging and we believe that certain countries, such as Russia and China, will bring back some form of quasi gold standard, using gold as backing, in order to bolster confidence in fiat currencies.
Gold will almost certainly be a foundation stone in a new international monetary system. Therefore, we expect it to be revalued to much higher levels in the coming years in dollar and all currency terms.
Must Read Guide: Currency Wars: Bye Bye Petrodollar – Buy, Buy Gold
MARKET UPDATE
Today’s AM fix was USD 1,164.00, EUR 1,091.52 and GBP 781.10 per ounce.
Yesterday’s AM fix was USD 1,149.00, EUR 1,080.50 and GBP 782.91 per ounce.
Gold climbed 1.96% percent or $22.50 and closed at $1,171.00 an ounce yesterday, while silver surged 3.21% or $0.50 at $16.06 an ounce.
In Singapore, bullion for immediate delivery ticked lower after the sharp gains seen on Wall Street.
Yesterday’s dovish tone of the U.S. Fed policy statement that left out the word “patient” sent precious metals upward and pressurized the U.S. dollar.
The Fed downgraded its economic growth and inflation projections for the first time since 2006, hinting that it is in no rush to push borrowing costs to more normal levels. It also cut its median estimate for the federal funds rate.
It is important to note that the Fed has been suggesting it will raise rates for many years now.
Chairwoman Janet Yellen also noted that the dollar would be a “notable drag” on exports and may be a downward force on inflation.
The U.S. central bank removed a reference to being “patient” on rates from its policy statement, opening the door for a hike in the next couple of months while sounding a cautious note on the health of the economic recovery.
Of interest is the fact that Fed officials also slashed their median estimate for the federal funds rate – the key overnight lending rate – to 0.625 percent for the end of 2015 from the 1.125 percent estimate in December.
In London’s late morning trading gold is at $1,165.75 or down 0.2 percent. Silver is at $15.88 or off 0.55 percent and platinum is at $1,118.97 or down 0.65 percent.
Updates and Award Winning Research Here
end
We will just have to wait and see what develops tomorrow!!
(courtesy Reuters/GATA)
Chinese banks won’t be part of new gold benchmarking at start, source tells Reuters
Submitted by cpowell on Thu, 2015-03-19 04:36. Section: Daily Dispatches
New Era of Gold Benchmarking to Start with Handful of Pioneers
By Clara Denina
Reuters
Thursday, March 19, 2015
LONDON — A handful of banks will start setting gold prices electronically on Friday, sources with direct knowledge of the matter said, as Intercontinental Exchange completes a sweeping change to London’s bullion benchmarks and dispenses with the century-old gold “fix.”
Since 1919, representatives from four or five banks have agreed a twice-daily price on which their customers — producers, consumers, and investors — could trade and value gold.
Sweeping reform triggered by a regulatory push for more transparency after the Libor interest rate-rigging scandal broke in 2012, saw banks stop acting as both data providers and market makers. …
Banks will still submit orders during the process, as they currently do.
“I would like to think (there will be) more than the current (four) … but we’ll have to wait and see,” a source with direct knowledge of the matter said.
Current providers of the gold “fix,” Barclays, HSBC, Bank of Nova Scotia, and Societe Generale, declined to comment on whether they will participate. …
The LBMA, which will retain intellectual property of the new benchmark, had said that 11 entities intended to participate in the new mechanism from the start.
Industrial and Commercial Bank of China, Bank of China International and China Construction Bank, which are ordinary members of the LBMA, were unlikely to be in the list of new participants at this stage, the first source said. …
… For the remainder of the report:
http://www.reuters.com/article/2015/03/19/gold-fix-idUSL6N0QK3O620150319
end
Hugo advises Greece that they should also back their drachma with a silver coin:
(courtesy Hugo Salinas Price)
Hugo Salinas Price: Greece’s currency options go beyond predatory euro and laughable drachma
Submitted by cpowell on Thu, 2015-03-19 04:52. Section: Daily Dispatches
12:45p SGT Thursday, March 19, 2015
Dear Friend of GATA and Gold:
Greece’s options go beyond a currency controlled by its stupid creditors, the euro, and re-establishing a domestic currency, the drachma, which would purport to draw value from an economy whose main enterprises are welfare and tax evasion. That is, as Mexican Civic Association for Silver President Hugo Salinas Price writes this week, Greece could issue a commodity currency with intrinsic value, a silver coin whose value in drachmas would be guaranteed by the nation’s central bank never to fall. Salinas Price’s commentary is headlined “Letter to Alexis Tsipras from Hugo Salinas Price, Dated July 25, 2012,” and it’s posted at the civic association’s Internet site here:
http://www.plata.com.mx/Mplata/articulos/articlesFilt.asp?fiidarticulo=2…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
end
Talk is cheap
Bill Holter tackles yesterday’s FOMC announcement;
(courtesy Bill Holter/Miles Franklin)
Yesterday the Fed made their announcement and deleted the famous word “patient”. I have never seen such a nonsensical frenzy over anything, never mind a single word. The reaction was everything …except the dollar was bid. Sadly, reality has also been deleted as the Fed cannot “go there”, if they did and when they do (are forced to), life as we knew it will be history. Reality is the global economy has stalled. Most of Europe is in recession, China’s growth has stalled and the U.S., even with fudged numbers will not be able to show any growth.
As recent examples, China’s real estate crashing at the fastest pace ever, Canada’s wholesale trade crashing, the Fed growth model show only .3% growth, housing starts dropped 17% and car sales have turned horrible. The sovereigns Ukraine and Greece are clearly bankrupt and currencies have already been more volatile than any time in history. Add to the previous an oil market that has collapsed and clearly a margin call has been issued.
My topic today of a global margin call is a serious one and one which should be looked at with an eye towards the debt and derivatives markets. For example, can the oil markets handle a 60% drop in product price without creating some dead and insolvent bodies? Oil is the largest and most important commodity market in the world with $trillions borrowed to drill, frack, produce, refine and ship to market. Some of this debt has been impaired and will never be paid back, who will take the losses? Someone, somewhere MUST take the losses, ultimately it will be whoever originally lent the capital. Ah yes, we will hear “but they were hedged”. I would ask how and by whom because as just mentioned, “someone must eat the loss”. The funny thing about debt is this, unless it is paid off, it never goes away and must be accounted for somewhere and by someone or entity.
Oil is just one market. What about the derivatives on currencies? Or sovereign treasury securities? What about stock markets? I ask these questions because one must question whether any central bank on the planet can ever actually tighten or if any treasury can employ austerity? Think about this long and hard. Central banks all over the world have been easing and printing while nearly all treasuries are deficit spending …and yet here we are with real economies stuck in the mud and financial markets with more leverage and less ability to perform than ever before.
The above is unfortunately lost on our academics driving the financial bus. While listening this morning to former Fed governor Robert McTeer, he actually said the Fed should just “let ‘er rip and raise rates, who’s afraid of a quarter point hike in rates after six years of 0%?” He also said the Fed did not initially lower rates for the stock market but it is a “referendum” on their policy. A few questions might be in order starting with a one worder, REALLY? The Fed does not act to affect the stock market? Do QE’s 1, 2, and 3 come to mind at all? Weren’t the stock markets collapsing and promptly reversed with each QE announcement? Yes I know, the plunge protection team is a minion of the Treasury, the Fed would never stoop so low… And what exactly does a “measly” quarter percent hike in rates mean?
In relation to one quarter point, a quarter point is a 100% increase …and here’s the rub. Everything from real estate to stocks and of course bonds are “based” or calculated doing an interest rate assumption. Using an interest rate, one can calculate how much of a mortgage they can carry or how much cash flow from a commercial or rental property is required to carry the note. As for stocks, PE ratios are discounted off of a base interest rate, a higher rate will generally mean a lower price. Bonds of course are directly inverse to interest rates. As I mentioned yesterday, the aspect of “front running” to exit is the problem we will now face. In other words, if you know or believe a margin call is going to be issued, your natural reaction will be to exit ahead of time …which creates a problem.
This problem arises because the “exit door” is so small. What I am trying to say is this, volume has decreased markedly over the last several years and in particular the last year. How exactly do investors actually exit? This is not a problem for Mom and Pop, it is a problem for those managing their pension plans. How will money managers with $billions under management get out? Who will stand as a buyer? If you are a seller, there must be a buyer …but at what price? Do you see? Any moves to exit or get out of the way will be self fulfilling in the form of a crash. More and more leverage has built in all markets as they went higher and higher, but volume has become less and less. Now, the Fed wants you to believe they will actually raise rates, it is like a lifeguard whistle telling everyone to get out of the water. But how?
Before finishing, the action of the dollar needs to be looked at. The dollar has been on a wild tear to the upside. Higher interest rates would presumably exacerbate this, but, there is a problem with this. A higher dollar will create more inflation for already inflation stricken countries and also cause financial stress for those short dollars. Remember, the financial system as a whole has never been more levered than it is now and rarely been under the current stress. A higher dollar will increase the stress on the financial system to the breaking point, yet with this much leverage nothing can be allowed to fail because it will spread like a virus.
Talk is cheap as the saying goes, but it is all the Fed can afford to do at this point. Higher rates cannot be allowed to happen, they certainly cannot be “policy” because it is suicide. I will be shocked if next move by the Fed is not the exact opposite of what they are talking about currently. The next move by the Fed in my opinion will be a massive QE4 to try to stop a tsunami of panic engulfing everything financial. Regards, Bill Holter.
end
And now for the important paper stories for today:
Early Thursday morning trading from Europe/Asia
1. Stocks generally higher on major Chinese bourses (only India’s Sensex and Nikkei lower)/yen falls to 120.69
1b Chinese yuan vs USA dollar/yuan skyrockets to 6.1958
2 Nikkei down 67.92 or 0.35%
3. Europe stocks mostly in the green/USA dollar index up to 98.58/Euro falls to 1.0697
3b Japan 10 year bond yield .32% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.69/
3c Nikkei still above 19,000
3d USA/Yen rate now below 121 barrier this morning
3e WTI 43.00 Brent 55.02
3f Gold down/Yen down
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 22.88%/Greek stocks down again by a huge 1.24%today/expect continual bank runs on Greek banks.
3j Greek 10 year bond yield: 11.27% (up by 46 basis point in yield)
Greece needs another 2 million euros raiding their pension fund.
3k Gold at 1166.00 dollars/silver $15.89
3l USA vs Russian rouble; (Russian rouble down 1/2 rouble/dollar in value) 59.96 despite lower oil prices
3m oil into the 43 dollar handle for WTI and 55 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/ the British pound is suffering
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 Netanyahu wins Israeli election/direction is to the right/drops negotiations with Palestinians to form a Palestinian state
3t Greece to auction 1.3 billion euros to cover Friday’s treasuries expiry.
3u ECB gives Greece only an additional 400 million euros for its emergency ELA
4. USA 10 year treasury bond at 1.95% early this morning. Thirty year rate well below 3% at 2.51%/yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
Dollar Regains Most Of Yesterday’s “Flash Crash” Losses. Oil Resumes Slide; 10Y Under 2%
If it was the Fed’s intention to slow down the relentless surge in the dollar with yesterday’s “impatient” removal which blamed the dollar strength on the “strength” in the US economy, it promptly failed after algos and a few carbon-based traders looked at the Atlanta Fed andrealized that a 0.3% Q1 GDP print is anything but “strong.” As a result the EURUSD, after soaring by nearly 400 pips yesterday in a market reminiscent of a third-world FX pair’s liquidity especially following the previously noted USD flash crash, the dollar has recoupped nearly all losses, and the DXY is once again on the way up and eyeing the resistance area of 100.
Of course, the only Fed intention was to push stocks higher, where it certainly succeeded compliments as usual of Citadel, and the S&P futures are flat since yesterday’s epic surge, which saw the market move from red to the year to just shy of all time highs. So as Larry Kudlow said“Just enjoy it: stocks are going up.”
One place where the resumption in dollar strength, however, has promptly manifested itself, is the price of crude, which soared yesterday as EURUSD rate differentials sent it soaring, At last check, WTI had fallen back to $43/bbl as focus returns to U.S. supply glut that saw prices fall to 6-yr low yday before FOMC policy statement gave prices a boost in U.S. afternoon. Yesterday’s gain ended a six-day losing streak. Today, Brent futures down less, allowing premium to WTI to widen toward $10. U.S.
“Markets had anticipated a stronger commitment from the Fed to start the interest rate hike sooner-rather-than-later; as this did not happen, the dollar weakened,” says Global Risk Management oil risk manager Michael Poulsen. “The weaker dollar made dollar-priced commodities, such as oil, increase.” Not for long though, and as the math turns to how long it takes before the US runs out of oil storage capacity, the bigger “June countdown” is not to the next FOMC meeting, but when in June the US will no longer be able to warehouse any unusued oil (aspresented first here).
Another asset class that has seen a far stickier response to the Fed’s statement in addition to stocks were bonds, with the US 10Y trading well under 2.00% again, even as the German Bund plunged just off record lows, and was at 0.18% at last check. Still, this is well above the negative print we (jokingly) predicted the German 10Y paper would see within 48 hours of the FOMC statement.
But one place whose assets are not benefiting from the Fed’s generosity at all, and which inexplicably trade with something called “risk” is Greece, whose 10 Year continues to surge, and was at 11.3% at last check, the widest since 2013, as fears the country may actually really Grexit this time around get louder and more credible by the day.
Unlike other asset classes, European equities have held relatively steady in the wake of the FOMC release. Stocks in Europe were left relatively unphased by the more dovish than anticipated Fed release as the subsequently stronger EUR would not do the European export sector any favours, therefore over-looking the move higher in US stocks. On an index specific basis, the DAX initially saw some underperformance following a downbeat update from Siemens which has subsequently weighed on the index-heavyweights shares. Elsewhere, the FTSE MIB outperforms on bid speculation for Pirelli and the FTSE 100 is being supported by miners after the move higher in metals markets yesterday. In fixed income markets, USTs have held steady at their post-FOMC best levels, while Gilts lead the way higher in a catch up play from the early UK close. In terms of macro news, according to sources, the ECB have approved EUR 400mln extension to their ELA programme, although this figure is reportedly not as much as had been requested by the Greek central bank. As such, focus on Greek/Europgroup negotiations still remain in vogue and the Greek 10yr yield resides at its highest level in a month.
In the 3rd TLTRO the ECB allotted EUR 97.848bln vs. Exp. EUR 40bln, which given the potential uptick in Eurozone liquidity saw EUR/USD tick lower by just under 20 pips, while modestly lifting Bunds and Euribor.
Asian equities traded mostly higher in the wake of the FOMC statement with the exception of the Nikkei 225 (-0.35%) which was weighed on by the subsequent JPY strength. However, Japanese stocks have since narrowed the losses on news that three large Japanese pension funds who manage around USD 250bln of assets will move funds away from fixed income markets and into equities, in addition to USD/JPY recovering as the session progressed. The ASX surged overnight as participants factored in the implications of lower rates for their domestic economy, with the index also supported by higher basic material prices.
FX markets have seen the greatest source of traction, with the USD-index (+1.2%) paring a bulk of yesterday’s significant slide, much to the detriment of its major counterparts with EUR/USD down in excess of a point. Today has once again also been another one for the central banks with the SNB keeping rates on hold at -0.75% as expected, although EUR/CHF was weighed on as some participants had been looking for the SNB to cut rates further. Elsewhere, the NOK has seen a dramatic strengthening against EUR after the Norges Bank unexpectedly kept rates on hold despite their Scandinavian counterpart Sweden cutting rates yesterday and increasing their bond-buying programme.
In the commodity complex, price action for Brent and WTI has largely been swayed by the aforementioned stronger USD. As such WTI crude futures trade lower by around USD 1.50, although still remain north of their lows heading into the Fed meeting. Spot gold and silver nonetheless still reside in close proximity to their post-FOMC levels given the attractiveness of gold as an inflation-hedge, with commodity newsflow otherwise light.
In summary: European stocks head toward highest level since 2000 after Fed said data indicated economic growth has moderated, fueling speculation it won’t be in a rush to raise interest rates. SNB keeps deposit rate at record low, Norway signals reduction after unexpectedly holding rate. Siemens sees ‘soft’ industrial business profit margin in 2Q. The Italian and Swedish markets are the best-performing larger bourses, German the worst. The euro is weaker against the dollar. Japanese 10yr bond yields fall; German yields decline. Commodities decline, with WTI crude, Brent crude underperforming and nickel outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, Bloomberg economic expectations, Philadelphia Fed index, leading index, current account balance due later.
Market Wrap
S&P 500 futures down 0.2% to 2087.4
Stoxx 600 up 0.7% to 401.3
US 10Yr yield up 2bps to 1.94%
German 10Yr yield down 1bps to 0.18%
MSCI Asia Pacific up 0.8% to 147.1
Gold spot down 0.1% to $1165.9/oz
71.2% of Stoxx 600 members gain, 26.7% decline
Eurostoxx 50 +0.2%, FTSE 100 +0.3%, CAC 40 +0.2%, DAX +0.1%, IBEX +0.4%, FTSEMIB +0.8%, SMI +0.4%
MSCI Asia Pacific up 0.8% to 147.1, Nikkei 225 down 0.3%, Hang Seng up 1.4%, Kospi up 0.5%, Shanghai Composite up 0.1%, ASX up 1.9%, Sensex down 0.2%
Euro down 1.72% to $1.0677
Dollar Index up 0.3% to 98.85
Italian 10Yr yield down 5bps to 1.26%
Spanish 10Yr yield down 5bps to 1.22%
French 10Yr yield down 2bps to 0.45%
S&P GSCI Index down 0.3% to 394.8
Brent Futures down 0.8% to $55.4/bbl, WTI Futures down 3% to $43.3/bbl
LME 3m Copper up 1.8% to $5771.5/MT
LME 3m Nickel up 1.8% to $13750/MT
Wheat futures up 0.2% to 511.8 USd/bu
Bulletin headline summary
European equities trade higher alongside a pullback in EUR strength, much to the benefit of the European export sector
SNB (as expected) and Norges Bank (unexpectedly) hold fire on cutting rates
Looking ahead, today sees the release of the weekly US jobs data and potential comments from Fed’s Tarullo
Treasuries modestly lower, paring some of gains seen yesterday after FOMC reduced estimates for how much fed funds rate is likely to rise this year and next, forecasts for GDP and PCE inflation.
Behind the Fed’s wary stance is a surge in USD, triggered in part by easier monetary policies abroad, and which is repressing already too-low U.S. inflation while restraining economic growth
The ECB raised the maximum amount of emergency liquidity available to Greek lenders by EU400m, less than the Greek central bank requested, people familiar with the decision said
Greek Prime Minister Alexis Tsipras heads to a EU summit hoping for a political breakthrough as German Chancellor Angela Merkel works to regain control over efforts to keep the euro- area together
U.K. PM Cameron will arrive in Brussels Thursday seeking to burnish his credentials as the best person to fight for British interests in the European Union during the bloc’s final summit before the May 7 U.K. election
Norway’s central bank unexpectedly left rates unchanged and signaled it’s prepared for more pronounced monetary easing to protect the economy against a plunge in oil prices
SNB President Thomas Jordan pledged to keep interest rates at a record low to weaken the franc after acknowledging that dropping his defense of the currency added to challenges for the economy
Sovereign 10Y yields mostly lower; Greece 10Y +21bps to 11.48%. Asian stocks mostly higher, European stocks gain, U.S. equity-index futures decline. Crude and gold lower, copper rises
DB’s Jim Reid as customary concludes the overnight summary
The Fed divorced itself from its previous rate forecasts with a pretty major down-scaling of their dots. YE 2015 was cut 50bps to 0.625%, 2016 was cut 63bps to 1.875% and 2017 was reduced 50bps to 3.125%. These have been looking odd for sometime given where the market was and the international trends (easing across the globe) and the likelihood of negative inflation over the summer. However even though the Fed moved, the market also moved with Dec 15, 16 and 17 futures contracts falling 20bps,18bps and 19bps to imply rates at 0.4%, 1.1% and 1.7% respectively at the end of the next 3 years. So the dots were probably the main story as the dropping of patient was expected. Outside of this not much has really changed as the Fed will still be data dependent but it’s becoming increasingly apparent that inflation is gaining more Fed attention relative to employment, especially as the Fed also marked their longer-run unemployment rate down (i.e. suggesting more slack than previously thought). Overall we continue to think a rate rise in 2015 will still be tough with headline inflation likely to be negative all summer and markets likely to take fright as a hike comes into view. One word of caution to this view would be if we have more days like yesterday where we saw a sizeable dollar correction and a commodities rally. If sustained then the inflation outlook might recover more quickly. So nothing is preordained.
Our view has long been that European equities would out-perform US through all of 2015. However if the Fed end up pushing back rate rises more and more, the pace of this trade will likely slow. We don’t think it reverses as Europe still have the upper hand with heavy QE but the easy part of the trade might be over given the move to a more dovish Fed. Maybe the trades that have worked well in 2015 might get a bit more two-way flow now that there are some doubts about the Fed.
Indeed the currency reversal was one of the highlights post Fed. The Euro had traded below $1.06 before the US market opened but a few hours later and after the FOMC it hit a high of $1.104 before settling down and closing at $1.086 (+2.52%) which is roughly where it is now. The broader DXY closed 1.04% weaker and has declined another 0.3% this morning. Amazingly, the intraday high to low range for the Euro was 4.4% which is the second highest on record since the commencement of the single currency in 1999. In fact, it was higher than any move we saw during the height of volatility in 2008/09 and second only to the move in September 2000 when we had the coordinated Central Bank intervention to support the Euro. Equity markets bounced with the S&P 500 closing +1.22% yesterday having traded some -0.6% intraday in the run up to the statement and credit markets rallied also with CDX IG 3bps tighter. There was a significant move in Treasuries too with the rally led by the belly of the curve with 5y (-16.5bps) and 10y yields (-13.1bps) rallying to 1.39% and 1.92% respectively. The latter is now back at early February levels. Commodity markets rebounded also, led by oil with WTI (+2.76%) and Brent (+4.49%) rallying hard. Gold (+1.57%) temporarily halted a recent slide with the largest single day rise since January 30th.
Quickly refreshing our screens this morning, most major bourses are trading firmer in Asia. The Shanghai Composite (+0.27%), Hang Seng (+1.31%) and Kospi (+0.40%) in particular are following the US lead. The Nikkei (-0.43%) is the exception, not helped by yesterday’s rally in the Yen. The better sentiment has helped fuel a rally in Asian credit too. The iTraxx Asia is 4bps tighter while 5y CDS in China (-5bps), Indonesia (-9bps) and Malaysia (-8bps) are firmer.
Back to yesterday, although something of a sideshow, there were contrasting moves in European sovereign bond markets with 10y benchmark yields in Germany (-8.5bps) and France (-6.3bps) rallying, but peripheral yields selling off some 2-10bps – perhaps reflecting the renewed Greece concerns. The sell-off in Bunds over the previous four days has in fact now been wiped out with yesterday’s rally with the 10y hitting a new record low at 0.197% – closing below 0.2% for the first time. Equity markets were more mixed on the other hand. The Stoxx 600 (+0.33%) closed firmer while the DAX (-0.48%) declined and peripheral markets were largely mixed.
Data was focused in the UK where readings were generally in line. The ILO unemployment rate was unchanged at 5.7% yoy and the claimant count ticked down a tenth of a percent to 2.4% yoy. Average weekly earnings were on the weaker side however with the 1.8% yoy reading below expectations of 2.2%. In terms of yesterday’s Budget, DB’s George Buckley noted that overall it did little to change the fiscal picture. Rather, the Chancellor delivered a number of electoral sweeteners that were broadly offset by plans to clamp down on tax evasion, among other measures, resulting in a broadly neutral budget over the forecast horizon. Meanwhile the Office for Budget Responsibility upgraded the growth forecasts for the UK by a relatively modest 0.1% in 2015 and 2016 to 2.5% and 2.3% respectively.
Focus today could well be on Greece where PM Tsipras is due to meet with the ECB’s Draghi, Germany’s Merkel, France’s Hollande and the EC’s Juncker on the sidelines of the EU summit. Yesterday we heard that the ECB had approved an increase in the ELA ceiling for Greek banks for €400bn while the government auctioned €1.3bn of T-bills ahead of the upcoming February maturities. Despite beginning technical discussions, progress so far appears to be limited with tensions between Greece and the German government continuing to run high. DB’s George Saravelos notes that this, along with the diminishing cash position for the Greek government is only adding to the continued concerns. Clearly a lot still needs to be done with a resolution still far from certain. A successful conclusion first of all to the current program review needs to be completed followed by this being passed through Greek parliament via legislation, which in turn would allow funding to be disbursed.
Recent talks on the European side of potential capital controls and also talks on the Greece side of a possible referendum highlight the delicate situation. George now puts equal probability on each of the three possible outcomes; 1) No agreement and suspension of ECB financing, 2) Full agreement followed by parliamentary ratification and 3) Reluctant agreement followed by a referendum. Clearly a lot of uncertainty lies ahead.
Just wrapping up Europe, there was more focus on Sweden yesterday when the Riksbank – in an unscheduled move – cut its repo rate deeper into negative territory, lowering the rate 15bps to -0.25% having previously eased last month. At the same time the Central Bank quadrupled its quantitative easing programme to 40bn Kronor as inflation continues to run well below target. The Kronor weakened 1.27% versus the Euro yesterday following the move.
Yesterday ahead of the roll to series 23 of the iTraxx indices we published a note looking at how the new series compares with the previous series looking at the rating and geographical breakdown of the indices as well as assessing where spreads should broadly trade on the new indices. The roll to the new Main series provides us with the greatest changes as the index replaces 5 consumer names with 5 financial names, increasing the number of financials to 30. The FV levels for the new series 23 indices are around 57bps, 59bps, 139bps and 279bps for the Main, Financial Senior, Financial Sub and Crossover indices respectively with the FV roll levels broadly in the region of +6bps, +4bps, +4bps and +7bps for the same indices respectively.
It’s a quiet calendar in Europe this morning with no notable releases to speak of. However the EU leaders summit could well generate some Greece-related headlines. In terms of the first data releases post FOMC this afternoon, we’ve got jobless claims, the February leading index and also the Philadelphia Fed business outlook to look forward to.
end
Greek bank deposits are falling badly with words that capital controls will be upon Greece very shortly. Greece got only 400 million euros of emergency ELA after requesting 900 million euros. They need 2.0 billion euros by tomorrow to repay the IMF and fund the next tranche of treasury bills:
(courtesy zero hedge)
Greek Bank Deposit Outflows Spike As Capital Controls Concern Spreads
With Greek bank bonds collapsing, stocks near record lows, Greek default risk at post-crisis record highs, and Greek government bond yields spiking, it has been surprisng that we have not seen the ATM lines and generalized ‘panic’ of a population in fear of being “Cyprus’d.” Well, now as ekathimerini reports, that appears to escalating and rapidly as credit sector officials estimated that the flight of deposits yesterday alone amounted to 350-400 million euros, which wassome five times higher than the daily average in previous days.
As ekathimerini reports, Greek banks are suffering from fresh turbulence due to the tension and the apparent collision course between Athens and its creditors. Bank stocks gave up more than 8 percent of their value on Wednesday, while the outflow of deposits was far greater than on previous days.
Credit sector officials estimated that the flight of deposits yesterday alone amounted to 350-400 million euros, which was some five times higher than the daily average in previous days. They added that Wednesday’s withdrawals totaled the most since an agreement was reached at the February 20 Eurogroup meeting.</