Yesterday we published the first set of 7 "What If" scenarios that didn't make it into the Citi Credit team's (already rather gloomy) year-ahead forecast. Because while Citi's "base case" was clearly bearish (our summary can be found here), what was left unsaid was even more unsettling, if not troubling. As the bank's credit team wrote "what about the outcomes that didn’t quite make it into our base case?
One month ago, Citi's credit team laid out its outlook for the coming year in what - in our opinion - was one of the gloomiest reports for the coming year, and included the following fascinating revelation according to which central bankers appears to have lost control: "That seems to be a growing fear among a number of central bankers that we have spoken to recently. In our experience, they too are somewhat baffled by the lack of volatility and concerned about the lack of response to negative headlines....
When yesterday we discussed the latest troubles facing embattled retailer Steinhoff, whose bonds are owned by none other than the ECB, we said that while the company's bonds mature in 2025, its bankruptcy is at most months away. In retrospect, and in light of the latest news, that may have been optimistic, because it now appears that a bankruptcy may be imminent and is at most just weeks away.
With many expecting long-yield to continue declining no matter what, and how many hikes, the Fed and central banks do on the short end, Tommi Utoslahti, a former derivatives trader and analyst and currently one of Bloomberg’s Global Macro squawkers, disagrees and as he writes in his latest Markets Live note below, expects a violent repricing in European rates, and especially the Bund market, where "Investors have become so blinded by QE-suppressed ultra-low yields that they risk sleepwalking into a major correction even as most hard indicators scream for heightened alertness." Of course, th
Two weeks ago, as part of our continuing coverage of the Steinhoff fiasco in which it emerged that the ECB was the mystery and (not so) proud buyer of just issued Steinhoff (now junk) bonds (maturing in 2025 but set for bankruptcy much sooner) and which lost more than half of their value overnight when it the company announced it was caught in what may be a terminal accounting fraud scandal, we said that ", it seems virtually guaranteed that the banks will suffer steep haircuts on their Steinhoff exposure" and "so will the ECB, which on Friday was rumored it was considering selling