Ever since the start of ECB's QE, one of the biggest concerns has been how will the ECB continue monetizing €60 billion in debt in a market that is increasingly illiquid and running out of collateral. Moments ago we got the answer when the ECB not only went even deeper into negative rates territory, cutting all three of its main rates, but boosted QE by €20BN.
The spread between the 30Y US Treasury yield and 2Y has plunged by 7.5bps this morning (as 2Y sells off and 30Y rallies post-Draghi) to 175bps. This is the flattest curve since Dec 2008 lows (at 172bps) which can only bode poorly for financials...
30Y bonds are bid (juicy yield compared to Europe) and 2Y yields are surging (room for a Fed rate hike)...
Still buying the Dimon Bottom?
Charts: Bloomberg
Initial jobless claims tumbles to 259k (from a revised 277k) near 43 year lows, leaving the smoother 4-week average lower at 267.5k. What we find "odd" about this seasonally-adjusted data is that the employment components of both the Manufacturing and Services ISM data has completely collapsed in the last few months. So what sector of the economy is maintaining the illusion?
Not The Onion...
Not even China tries this level of shenanigans.
Charts: Bloomberg
"They don't quite trust the higher spot prices yet," warned one trader as the changing shape of the Brent forward curve suggests oil producers have been locking in recent gains across the crude futures price structure.
As Reuters reports, producers - who have been hoping that a 20-month price rout has bottomed out - do not have full confidence that a recovery is underway, as seen by the shape of the Brent forward curve out to the year 2020.
Well, the people wanted a "bazooka-sized" surprise from Draghi, and they got it.