Thursday and Friday losses pushed Brazilian equities to a 3.6% loss for the week. After gaining 3.1% Monday, losses in Tuesday’s and Friday’s sessions saw the Brazilian real end the week down 0.6%. The Turkish lira also had early-week gains evaporate. Vale CDS blew right through last week’s (pre-Fed) highs to end Friday at a multi-year high 370 bps. Mexican peso yields jumped 17 bps this week to 5.86% and Colombia yields jumped 20 bps to 6.96%. After rallying on Fed-Dove, Venezuela CDS surged 530 bps this week to 4,697. Ukraine CDS jumped 325 bps to 2,674. Fleeting stabilization at the troubled Periphery… The Nasdaq Composite rose 3.2%, trading Friday to the highest level since March 2000. The Nasdaq Transports jumped 5.8% and the Nasdaq Biotechs rose 6.2% this week. After trading above 18% last Thursday, Greek five-year bond yields dropped to almost 15% Thursday before ending the week at 15.6%. Greek CDS surged 300 bps Friday to 1,900. Greek uncertainty remains a major market risk.
India’s equity Bubble showed vulnerability, with the Sensex index dropping 2.8% this week. Unemployment sat above 14%. Today’s parallels are much closer to 1929. Regrettably, the Fed drew the wrong lessons from the “tech” and mortgage finance Bubble episodes. Not only is the vast majority of new mortgage Credit this year government-backed, Washington guarantees are being slapped on hundreds of billions of existing “nonconventional” mortgages. “Terminal Phase Excess” is fundamental to my Credit Bubble macro analytical framework. There reaches a momentum phase in prolonged Bubbles where systemic risks rise exponentially. Later, there may be a bill to vote on, and if it passes, there will be endless political efforts to repeal it, and, if it is repealed, to enact it again. A meaningful increase in rates will wait until the committee is more confident in achieving its 2% inflation rate target. Yellen’s press conference underscored key points from the statement: “Compared with the projections made in December, most participants lowered their path to the federal funds rate consistent with the downward revisions made to the projections for GDP growth and inflation as well as somewhat lower estimates of the longer-run normal unemployment rate.” “We noted that export growth has weakened.
So why the panicked reaction in the currency markets to the Fed’s statement and chair Yellen’s press conference? Key market takeaways from the Fed statement: “export growth has weakened.” “Inflation has declined further below the Committee’s longer-run objective…” The statement also listed “readings on financial and international developments” as indicators the Fed will be assessing as it determines when to begin raising rates. Markets were unsettled here at home as well. This is something that came up in one of our campaigns as well, and thank you for sparking a discussion about this here. The heavily indebted Brazilian corporate and banking sectors came under pronounced selling pressure again this week. After 온라인카지노 -Dove rally, Brazilian 10-year (real) bond yields were up 14 bps this week to 13.21%. Ominously, 온라인카지노 remain at elevated levels, ending the week only 18 bps below recent (pre-Fed) 11-year highs. Petrobras CDS increased 5 bps this week to an elevated 625 bps, though prices remain below last week’s high of almost 700 bps.
They blew it once again this week. 2013 Cypriot bailout shows temporarily shutting banks and restricting the flow of capital could stabilize Greece’s financial system and allow it to remain part of the currency union. The billionaire co-founder of DoubleLine Capital made the comments in an investor presentation… March 17 – Bloomberg (Kelly Bit): “Ray Dalio, founder of the world’s largest hedge fund firm, Bridgewater Associates, told investors there’s a risk that the Federal Reserve could create a market rout similar to that of 1937 if it raises interest rates too fast… ‘The biggest risk we face today is prematurely engineering restrictive monetary conditions,’ Evans wrote in a paper released Thursday that was co-written with reserve bank researchers Jonas Fisher, Francois Gourio and Spencer Krane. March 19 – Bloomberg (Jeff Kearns): “Federal Reserve Bank of Chicago President Charles Evans, who votes on policy this year, said in a research paper that interest rates should remain near zero for longer amid ‘substantial uncertainty’ about inflation and employment. Federal Reserve hike interest rates too soon. March 17 – Bloomberg (Margaret Collins): “Jeffrey Gundlach said if the Federal Reserve raises interest rates in the middle of 2015 the central bank will have to reverse course.