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Launching this week’s Treasury issuance of 3, 10 and 30Y paper, this afternoon’s 3-year note auction results was “stellar”, as Stone McCarthy put it.

The auction stopped 0.9 bps through the 1.529% When Issued, printing at 1.520% – the third consecutive “stopping through” auction in a row – with the highest bid/cover in more than a year and a half, as 3.13 bids tendered for every dollar, the highest since December 2015, far above the 2.80 6 month average. There were $75.1BN bids for $24BN in notes sold (ex-SOMA).

The internals were also impressive, with foreign buyers, or Indirects, awarded 64.1%, above last month’s 52.6% and above the 6MMA of 54.6%; Directs took down 10.2%, also above the 6 month average of 8.37, leaving Dealers with 25.8% of the final allotment.

Overall, another strong auction on the short-end of the curve, suggesting that there may have been an outsized element of short covering following today’s much more hawkish then expected JOLTS report which sent the USD surging, and prompted speculation about a faster than expected tightening by the Fed.

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Content originally published at iBankCoin.com

According to deep state’s department of brand management & optics Atlantic division, the ever-pious Hillary Clinton wants to become a pastor – a move which is sure to bring religious rust-belt swing voters back to the blue side for any future political endeavors…

“Hillary Clinton wants to preach. That’s what she told Bill Shillady, her longtime pastor, at a recent photo shoot for his new book about the daily devotionals he sent her during the 2016 campaign. Scattered bits of reporting suggest that ministry has always been a secret dream of the two-time presidential candidate: Last fall, the former Newsweek editor Kenneth Woodward revealed that Clinton told him in 1994 that she thought “all the time” about becoming an ordained Methodist minister. She asked him not to write about it, though: “It will make me seem much too pious.” The incident perfectly captures Clinton’s long campaign to modulate—and sometimes obscure—expressions of her faith.” –The Atlantic

Because what better way to make people forget about a massive pay-for-play scheme, raping Haiti, and a bitchy image than God?

Seances

While Hillary has apparently been in the closet for decades over her desire to preach, she turned heads in the 90’s when investigative journalist Bob Woodward wrote in his book ‘The Choice,” that Clinton “held imaginary conversations with Eleanor Roosevelt and Mahatma Ghandi as therapeutic release.” When an advisor suggested that she communicate with Jesus Christ, she declined, saying it would be “too personal.”

Satanic Idols

In 1993, the president of Wellesley College approved a new rule that all senior theses written by a president or first lady of the United States would be kept under lock and key, a move aimed at preventing the public from learning about their new First Lady. After the Clintons left the White House, however, Hillary’s senior thesis was released to the public – a 92 page homage to radical leftist Saul Alinsky, who dedicated his book to Lucifer.

Hillary describes Alinsky as a “neo-Hobbesian who objects to the conventional mystique surrounding political processes; for him, conflict is the route to power.”

Kind of like Satan, or Jihad.

That’s the spirit! 

I’m sure you remember #Spiritcooking satanist Marina Abramovic from 2016 election Wikileaks – who Tony Podesta gave money to, who was invited to Hillary Clinton’s Campaign launch, whose art Hillary Clinton placed in US embassies around the world, who Hillary wanted to invite to a lunch event, who donated the maximum $2700 to Hillary’s campaign, and who said in a Reddit AMA (“Ask Me Anything”) that her spirit cooking dinners in private homes are not art.

I think it’s safe to say that Hillary Clinton is a fan of Marina Abramovic, whose ‘art’ probably wouldn’t go over so well with the Methodist congregation Hillary apparently wants to preach to.

While Hillary’s base is sure to lap up her new ‘revelation’ about her faith, the rest of us aren’t buying it…

What will they cook up next?

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Authored by Jeffrey Snyder via Alhambra Investment Partners,

The mainstream media is about to be presented with another (small) gift. In its quest to discredit populism, the condition of inflation has become paramount for largely the right reasons (accidents do happen). In the context of the macro economy of 2017, inflation isn’t really about consumer prices except as a broad gauge of hidden monetary conditions.

Therefore, if inflation behaves as it is supposed to after so many years of “stimulus”, then the political opposition to the status quo really is about racism and xenophobia. If, however, inflation underwhelms for now the sixth year and counting, there just might be something to this economic anxiety element of grand and growing political discord.

In many ways this isn’t a point of contention at all, merely a misreading of what policymakers are actually doing and why. The global economy really has suffered some horrible fate, but what? Inflation underwhelms because the economy does and has, but policymakers in 2017 are trying to figure out why in a way that leaves them blameless.

Any long-term GDP chart for any place shows clearly that it is small wonder political and social devastation took so long to start manifesting. That speaks to the power of Economics and the tremendous benefit of the doubt it began with, and then squandered. People largely believed Ben Bernanke when he said he knew what he was doing with QE2 (without ever accounting why he felt there needed to be a second) or Mario Draghi when he made his promise. The public did so because they wanted to believe such a big awful thing was fixable.

The media is still stuck on the idea of the economy being fixed, however, though policymakers have more than a year ago shifted to figuring out why it won’t ever be. Inflation for them is now the measure of who’s to blame, not what will happen.

Again, if inflation continues to underperform the 2% target here and elsewhere, even textbook Economics makes it a monetary reason. If it gets back to and above 2%, drug addicts and Baby Boomers would have been a legitimate structural drag, meaning QE failed because it stood no chance of ever working. You can see the stakes for central bankers as they have this year practically resorted to outright pleading, as if saying the thing over and over will increase the chances of it happening.

So it must have been some relief when earlier this year oil price base effects raised the CPI to above 2% for three months starting last December (and the HICP for only one month in Europe). It would stay above 2% for a total of five, but those last two were on the way back down again, clearly showing that it was oil not the opioid epidemic the public should turn to for answers.

Given the nature of its annual comparison, WTI was this July on an upswing whereas in July 2016 falling again. Crude oil’s contribution to consumer price inflation last month is once more significantly positive, meaning that in all likelihood on Friday when the BLS reports the CPI for July it will be accelerated from four straight months of “unexpected” weakness. There will certainly be much crowing and rejoicing.

But it won’t matter for more than just a single news cycle, not the least of which because of the bond market that policymakers and especially economists (therefore the media) just can’t (or refuse) seem to understand.

“The market has paid a lot more attention to inflation than in recent years, simply because that has the potential to be what changes the Fed’s mind on further rate hikes,” [said Gennadiy Goldberg, an interest-rate strategist at TD Securities]. This week’s report “has a pretty substantial amount of power to push rates to annual lows or getting us off those lows and pushing rates higher.”

Once again, no, no, and no. The bond market takes no cues from monetary policy except if it views that policy to be effective. Interest rates rise because of opportunity, not because the Fed attempts to command it with the federal funds rate as in 2016, 2004, or even 1994. There is no “hawkishness” or “dovishness” by itself, instead the interpretation of “hawkishness” if things are actually getting better or “dovishness” if they aren’t. This other convention where the Fed is at the center of everything just doesn’t wash.

It presupposes infallibility which has been proven not to exist. Presumably the Fed’s “hawkishness” derives from its proficiency in economic interpretation. Therefore, bond rates would rise not based on monetary policy action per se, but rather agreeing with the Fed’s interpretation of what “hawkishness” means as far as economic opportunity. To claim that the bond market must follow monetary policy is to simultaneously claim that the FOMC is always right; and further that bonds must always defer in that judgment to these economists.

 

The bond market does not do this, though it does take into consideration central bank judgment as part of its stream of information. Before the summer of 2011, the bond market largely agreed with FOMC assessments. By and large, though, ever since 2011 the bond market which is always free to disagree with them about the economy or even the state of monetary function has exercised that freedom and in convincing fashion. From 2013 forward, nominal rates should have risen and curves steepened as economists and policymakers declared QE3 a resounding success, with particular emphasis on the unemployment rate. The bond market was correct, not economists.

 

What drives UST yields or eurodollar futures prices is therefore not “hawkishness” or “dovishness”, but rather perceptions about whether “hawkishness”, “dovishness”, Trump, or even Paul Krugman’s fake alien invasion scenario will amount to anything positive and the significance of it. It is the translation of current conditions into considerations about the future, captured in prices and yields – the actual discounting of information, of which monetary policy is only a (variable) part.

And oil prices factor to a much higher degree than Janet Yellen for these reasons. It is oil that moves the CPI (or PCE Deflator) which is a very negative commentary on the economy tomorrow as well as today. Unless oil prices really break higher, then the bond market gives far more weight to what the FOMC members would all rather never consider – the problem really is money and economy rather than drugs and demographics.

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King Dollar hasn’t had much to brag about the past 6-months, as it has decline nearly 10% this year. The decline took it down last week to test a potential dual support point, that could be important. See support and reversal point in the chart below-

CLICK ON CHART TO ENLARGE

Last week King$ found itself testing potential dual support at (1). While testing this potential support point, it created a “bullish wick/reversal pattern.” While support was being tested at (1), weekly momentum was oversold, hitting a level not seen in years. The Euro also found itself at an interesting price point, as bullish sentiment in the Euro was hitting levels, not seen many times over the past decade. Chart from Sentimentrader.com

CLICK ON CHART TO ENLARGE

While the US$ was weak, the Euro has been strong this year. The rally in the Euro has it testing old support as new resistance at (3). At the same time the Euro could be testing resistance, is is now pretty easy to find investors bullish the Euro at (2). A few times in the past when bullish sentiment towards the Euro was high at each (1), the Euro was closer to highs than lows.

Due to the support test, momentum being oversold and Euro bulls easy to find, Premium Members took a position in this space last week, that is going against the crowd with a tight stop.

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National assembly speaker (and purported replacement) Baleka Mbete's secret no-confidence vote has failed to oust South African President Zuma.

Speaker of Parliament Baleka Mbete shocked South Africans Monday when she announced her decision to allow the vote to proceed on a secret ballot, which would allow party members to vote against their leader outside the public spotlight.

"I understand and accept that a motion of no confidence in the president is a very important matter, a potent tool toward holding the president to account," she said at a press briefing Monday in Cape Town. She did not take questions from reporters.

 

The no confidence vote, she said, "constitutes one of the severest political consequences imaginable" and her decision to allow the vote to proceed anonymously is "about putting the resilience of our democratic institution to test."

Mbete needed 201 votes (Zuma's ANC dominates the Parliament with 249 out of 400 seats and so for the motion to pass, at least 50 party members would have to defect to the opposition – something that has never happened before in a party that defeated South Africa's apartheid system and is known for its loyalty).

However, some have argued that the number is lower. If the need arises, National Assembly will seek legal opinion on whether majority in no-confidence motion on President Jacob Zuma is based on number of seats in assembly or if vacancies in NA should be subtracted, Speaker Baleka Mbete tells lawmakers in Cape Town.

• Mbete says simple majority to be calculated as 201, or 50% plus one seat of 400 seats in National Assembly.
• Democratic Alliance, which is the main opposition party, argues seats should exclude 5 vacancies, which takes total number of seats to 395 and lowers majority needed to pass the motion

South African lawmakers began to cast their votes at 1043am ET (ZAR had leaked very modestly lower into the start of the vote).

Voting finished at 1150ET and the count began (as lawmakers squabbled over constitutional details).

Counting finished at 1235ET. ZAR dropped on the riging on the 5-minute warning bells.

The result:

Total votes: Yes 187, No 198 –  Zuma survives

• *SOUTH AFRICAN PRESIDENT ZUMA SURVIVES NO-CONFIDENCE VOTE
• *ZUMA IS SAID TO DEFEAT NO-CONFIDENCE VOTE

The reaction is clear…

Zuma will now retain his position as ANC president until his tenure ends in December. His term as president of the country runs through 2019.

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First thing this morning we reported that according to a 500-page report by the Japanese Defense Ministry, North Korea may now be in possession of a miniature nuclear warhead. That said, the report did not move the market because the Japanese report was largely inconclusive and did not claim with certainty that this is the case.

Now, moments ago, the exact same narrative escalated when the WaPo echoed what Japan said, only it now “confirms” that North Korea has successfully produced a miniaturized nuclear warhead that can fit inside its missiles, “crossing a key threshold on the path to becoming a full-fledged nuclear power, U.S. intelligence officials have concluded in a confidential assessment.”

As the WaPo adds, the analysis completed last month by the Defense Intelligence Agency comes on the heels of another intelligence assessment that sharply raises the official estimate for the total number of bombs in the communist country’s atomic arsenal.

“The IC [intelligence community] assesses North Korea has produced nuclear weapons for ballistic missile delivery, to include delivery by ICBM-class missiles,” the assessment states, in an excerpt read to The Washington Post. The assessment’s broad conclusions were verified by two U.S. officials familiar with the document. It is not yet known whether the reclusive regime has successfully tested the smaller design, although North Korean officially last year claimed to have done so.

The U.S. calculated last month that up to 60 nuclear weapons are now controlled by North Korean leader Kim Jong Un. Some independent experts believe the number of bombs is much smaller.

As Jeff Bezos’ paper of record adds, the findings are likely to deepen concerns about an evolving North Korean military threat that appears to be advancing far more rapidly than many experts had predicted. The “conclusion” will also accelerate US plans, already in place, to intervene “preemptive” in North Korea, just as the neo-con/warhawks in Washington desire, once again binding Trump in the process.

The WaPo report has certainly impacted the market, well the FX market if not the S&P which just keeps rising as CTAs are buying because other CTAs are buying, and the USDJPY has slumped on the news, revealing the latest divergence between it and the S&P.

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We have previously shown the chart below on countless occasions, so we are content to see that increasingly more banks are showcasing it as the biggest potential threat to the future of the market’s artificial levitation. Here is BofA’s Martin Mauro explaining why “investors may be well served by locking in some profits in US stocks.”

Central banks turning off the liquidity spigot: Among the most striking market developments in recent years has been the coordinated efforts by the world’s central banks to supply liquidity by purchasing financial assets. Investment Strategist Michael Hartnett points out that since the collapse of Lehman Brothers in 2008, central banks have bought $10.8 trillion in assets, and that liquidity has propelled financial markets all over the world.

That phase, as Citi’s Matt King warned two months ago, is ending. 

Now it appears that we are on the cusp of global synchronized monetary tightening, according to Hartnett. Central banks in the US, Canada and China have raised rates this year, while the Bank of England has stopped asset purchases and the European Central Bank is on track to end its asset purchases in 2018. Moreover, the reduced pace of re-investment that the Fed has outlined would reduce the size of its balance sheet by $2 trillion by the end of 2022.

BofA’s conclusion: “The unwind of the balance sheet could impose a strain on financial assets” and as a result BofA now believes “that investors may be well served by locking in some profits in US stocks.”

And while the unwind of the global central bank balance sheet will certainly have a dire effect on global risk assets, no matter what Bullard, Kocherlakota or the rest of the peanut gallery says (or rather, precisely because they deny it) a better question – one which Matt King asked two months ago – is whether this broken market can no longer execute its primary function: discounting the future:

… central banks still cling to the textbook model in which the market discounts all available information ahead of time, meaning that by the time they actually come to do their reduction, provided they’ve telegraphed it beforehand, the effect is already priced in. Unfortunately they seem to have neglected the textbook footnote that states that markets function this way only when they are deep and liquid. That might have been a reasonable description of pre-crisis markets; it seems a deeply unreasonable assumption for post-crisis markets in which leverage is constrained and one set of buyers have come along and absorbed virtually all of the world’s net new issuance.

The above is a major issue for Janet Yellen because while the Fed may hope the market is only “modestly” broken, and can fix itself when the liquidity support is yanked, if the market is too broken to realize that it is broken, and just keeps grinding – or surging – higher and higher, the Fed will soon have a major problem on its hands as it will have no choice but to actively intervene in equity markets on the short side, a skill which none of the Fed’s traders have after nearly a decade of only buying.

But before that, it will be the bears that will be carted out first, because even though we are late, late, late into the cycle, the following table shows the S&P returns in the year just prior to every previous market peak:

Although we are getting more cautious on equity markets, we note that some of the best returns come at the end of a bull market, which makes the case for maintaining some presence in the market. According to Subramanian, in the 12-month period preceding prior market peaks, the historical total return has average 25%. The S&P 500 is up 16% over the last 12 months, suggesting that some of those gains may have already been realized.

Good luck timing the crash.

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