Thought For A Day
Archives of “July 2019” month
rssThis has to be one of the craziest sovereign curves of all-time
German 10s fall below ECB deposit rate
The bond market in Europe is absolutely on fire.
Yesterday’s announcement from European leaders that Italy wouldn’t face penalties for its deficit continued the insane rally in sovereign bonds. The market is also convinced that Christine Lagarde will be unafraid to dive deeper into experimental monetary policy. In the past five hours it finally ebbed with yields hitting cycle lows only to bounce in what looked like the final stretches of a short squeeze.
The moves have left sovereign curves in the eurozone at levels that were unthinkable years ago. The German curve is now sub-zero out to 20 years. Importantly, the bund yield also fell below the deposit rate of -0.40% for the first time.
German 10s fall below ECB deposit rate
So while equity markets are cheering everything at the moment, the bond market continues to say that something is terribly sick in the eurozone and the global economy.
European equity close: Modest moves aside from the breakout in Italy
Market continues to cheer end of Italian budget impasse
- German DAX +0.1%
- French CAC flat
- Spain IBEX flat
- UK FTSE 100 -0.1%
- Italy MIB +1.0%
Italian equities appear to be breaking out.
Happy July 4th
Have a great Independence Day, folks! Enjoy the beach, BBQ, and fireworks but let us never, ever forget what we celebrate.
E pluribus unum over and out!
Russia says submersible that caught fire was nuclear powered
Russia has admitted a submersible involved in the country’s worst naval accident in more than a decade was nuclear powered, nearly three days after it caught fire during a top secret mission off the northern coast.
Defence minister Sergei Shoigu told president Vladimir Putin that the submersible’s nuclear reactor was “completely isolated and unmanned” and in full working condition, according to a transcript published on the Kremlin’s website on Thursday.
Mr Shoigu said the fire began in the submersible’s battery compartment, which then spread, killing 14 sailors from smoke inhalation and injuring an unspecified number of others. The sailors evacuated some of the people on board, then isolated the fire at the cost of their own lives, Mr Shoigu said.
The Kremlin has said it will not name the ship or clarify its mission. Russian media have reported that the fire broke out on an AS-31 submarine complex known as the Losharik, which normally travels under a larger submarine to avoid detection and can itself release another, smaller submersible.
One of the Russian navy’s most secret vessels, the Losharik is built to dive much deeper than an ordinary submarine and can survey the ocean floor.
The accident was Russia’s most fatal submarine tragedy since a fire killed 20 and injured 21 during sea trials of a nuclear-powered submarine in the Sea of Japan in 2008.
German 10-year bund yields fall below ECB deposit facility rate of -0.40%
German bonds continue to rally as yields sink to fresh lows
Suddenly, a fixed deposit placement doesn’t sound like a bad idea given how things are going in Europe’s bond market.
China says that it won’t engage in competitive currency devaluation
China responding to more finger-pointing by Trump overnight
In case you missed the headline overnight, Trump mentioned that “China and Europe are playing a big currency manipulation game” and urged that the US should do the same to match. This isn’t anything new and has been an ongoing ordeal since about forever now.
Oil stumbles in quiet trading as OPEC+ deal extension earlier this week fails to inspire
Oil is down by more than 1% on the day now
The ‘buy the rumour, sell the fact’ play is still very much in motion as oil is getting no reprieve at all from the fact that OPEC+ sealed a nine-month extension to the current output cuts deal, which was announced on Tuesday.
Oil fell hard on the day itself before a slight recovery amid risk-on sentiment overnight but the fall is resuming now with prices down by almost 1.3% currently.
The move higher in oil during June in anticipation of the OPEC+ decision failed to breach key resistance levels with the daily moving averages and the trendline resistance from April-May helping to limit gains and kept sellers in the game.
As such, we’re seeing sellers seize further control now and the fact that OPEC+ has done just a little above the bare minimum isn’t going to convince markets that the oversupply issue in 1H 2019 will go away in the 2H 2019.
ICYMI – UK regulator wants a ban on cryptocurrency products
This from Wednesday in the UK papers.
On the UK’s Financial Conduct Authority (FCA) saying derivatives and exchange-traded notes that reference crypto-assets were “ill-suited” to small investors
- extreme volatility
- difficulty in valuing them
- consumers’ patchy understanding
- increased risk of financial crime
Said investors might “suffer harm from sudden and unexpected losses if they invest in these products”.
Pretty much the same for any financial products you don’t understand, but I guess the FCA have a point saying crypto products are worse due to the extreme volatility yeah.
Meanwhile, BTC in Asia today has added on to its recent rally:
Trump administration scheduling a call next week between US and China on trade
USTR official with the announcement.
Getting someone to pencil in an appointment for a phone call gets an official announcement. But, haven’t these phone calls begun already?
Ah well. the good news is trade folks from China and the US are at least talking.
‘Principal’ level phone call. The most recent development on talks at this level was the break down of the talks and the six week hiatus leading into the G20 meeting. Will the market get its hopes up again or have we learnt not to expect much after continual disappointments?
