Business

A few market participants have noticed that the US High Yield Energy sector's credit risk collapsed 170bps this morning according to Bloomberg's data. This is the biggest plunge (rally) in the index of "incredibly risky stuff" on record and in the face of new cycle lows in crude, borrowing bases contracting, and rig counts crashing, this seemed odd... well here is why the index collapsed (spoiler alert - do not get excited).

So this happened and everyone rejoiced...

But here is why...

It just never fails.

Earlier today, the 3 Year was the only place on the curve that was trading special in repo, at a rate of -0.35% as shown in the Stone McCarthy chart below, with no shortages at any other point:

That, as regular readers know, has been a nearly flawless predictor of auction strength, and the potential for a short squeeze into the 1pm issuance.

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Are corporate profits due for a retest of the lower channel line? If so, what happens to equity valuations when corporate profits plummet?

Is the U.S. economy in recession? Is it heading for recession? These questions can only be answered in hindsight, but it's worth looking for clues to what might be just ahead.

With rate-hike odds plunging for every meeting across 2016, and bond yields collapsing almost as fast as stocks, it appears the market's faith in the The Fed is faltering fast...

Crude is now down 20% since The Fed! Stocks down 7% and bonds and bullion up 2% - does that sound like The Fed's decision inspired confidence?

No - of course not. But then there's this:

Via Constantin Gurdgiev's True Economics blog,

Here's a neat summary chart based on data from BIS through June 2015, covering total global credit (debt) outstanding (excluding IMF debt), issued in three main currencies:

That savage deleveraging... it has been truly epically... unnoticeable...