Bund bounces back

Well since the last update we have traded pretty much sideways, both in bonds and stocks. This was to be expected after such a big run up, this consolidation is likely to continue, until we have something to push us significantly one way or the other.
US stocks made an attempt to break to the upside, but sellers returned for some much expected profit taking.
Chrysler announced bankruptcy protection, so one down out of 3. It is trying to reach a deal with Fiat to keep it alive, I believe it will but it is the weakest out of the three and is likely to find it the hardest to resurrect its fortunes.
Euribors enjoyed a a somewhat volatile session, however spreads remained broadly in line. Jun10-Sep10 Spread is now trading 19.5s and 20s slightly lower then the last outlook a week ago, further out the dec10-mar11 is still trading 19s-19.5s. Today I played the range, but found legging a bit difficult as many of the indicators were off the mark. We had for a majority of the day Stocks and Bonds going up in unison, as well as wildly diverging bund and schatz.
We have may day holiday tomorrow so European markets will be shut.

Stocks end down, financials dump

Well they say the more it goes up the harder they fall, and this was definatly the case with financials today. Bank of America gave up 25% despite having a great 1st quarter making more then the company made the whole of last year.
As expected bonds came back in favour with the bund rallying 100 ticks, to almost trade 123s. The "leaked" stress test report has certainly raffled a few feathers but its hard to tell how much it is to be believed.
Looking forward I would imagine a further consolidation to the downside before we think of going much higher for stocks, and for bunds,I'm still looking for 124s.
On a personal note I will be gone for the next week, happy trading!

Stress test revealed

Bonds up stocks down as a leaked Bank stress test supposedly reveals what we already know and that is that we are in deep S**T. Bunds up 45 ticks as a speak, Euribors are positive after being down earlier.
Below I have copied the results which are from the Turner Radio network:

The Turner Radio Network has obtained "stress test" results for the top 19 Banks in the USA.

The stress tests were conducted to determine how well, if at all, the top 19 banks in the USA could withstand further or future economic hardship.

When the tests were completed, regulators within the Treasury and inside the Federal Reserve began bickering with each other as to whether or not the test results should be made public. That bickering continues to this very day as evidenced by this "main stream media" report.

The Turner Radio Network has obtained the stress test results. They are very bad. The most salient points from the stress tests appear below.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular - JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank - taking especially large risks.

6) Bank of America`s total credit exposure to derivatives was 179 percent of its risk-based capital; Citibank`s was 278 percent; JPMorgan Chase`s, 382 percent; and HSBC America`s, 550 percent. It gets even worse: Goldman Sachs began reporting as a commercial bank, revealing an alarming total credit exposure of 1,056 percent, or more than ten times its capital!

7) Not only are there serious questions about whether or not JPMorgan Chase, Goldman Sachs,Citibank, Wells Fargo, Sun Trust Bank, HSBC Bank USA, can continue in business, more than 1,800 regional and smaller institutions are at risk of failure despite government bailouts!

The debt crisis is much greater than the government has reported. The FDIC`s "Problem List" of troubled banks includes 252 institutions with assets of $159 billion. 1,816 banks and thrifts are at risk of failure, with total assets of $4.67 trillion, compared to 1,568 institutions, with $2.32 trillion in total assets in prior quarter.

Put bluntly, the entire US Banking System is in complete and total collapse.

More details as they become available. . . . . .


UPDATE 0147 HRS EDT Monday, April 20, 2009 --

For those who may be skeptical about the veracity of the stress test report above, be reminded that only last Sunday, April 12, this radio network obtained and published a Department of Homeland Security (DHS) Memo outlining their concerns that returning US military vets posed a domestic security threat as "right wing extremists." That memo, available here, is marked "FOR OFFICIAL USE ONLY" and contained strict warnings that it was not to be released to the public or to the media. We obtained it and published it days before other media outlets.

That DHS report appeared on this blog at least two full days before the story was picked up by The Washington Times, and virtually every other US media outlet.

Details of certain aspects of the stress test reported above have now been CONFIRMED through REUTERS News service when they disclosed the risk-capital percentages publicly on April 6, 2009 at this link

Further, todays Wall Street Journal (April 20, 2009) is confirming at this link that lending by the largest banks has DECREASED 23% since the government began the T.A.R.P. program, causing many in Congress to ask where the money has actually been going. Apparently, it has been going into propping-up the failing banks instead of out in loans to the public.


Its hard to tell whether this is true or not, but the market is believing it seems at the moment. My opinioon is that we will never know the truth.

GE and Citigroup results better then expected

So we got slightly better numbers then expected from these two Blue chips. We gaping up pre market on the two, I could see this as buy the rumour sell the fact though. I see us ending down for the day despite early strength.

JP Morgan lifts markets

Another up day for stocks yesterday as we breached 8100 after good results from JP Morgan. I along with many other do think this is getting a bit over extended, but whilst the momentum is to the upside I am staying clear of punting short unless the tape suggests otherwise. Today with results due from GE and Citigroup, this will really be a test to see if we keep going higher in these markets.
On the Bond front, Bunds did exactly as expected and tested 122.45 and actually went as low as 122.30. Before bouncing back to the 122.45 level. It was a very clear sell signal as yesterdays analysis showed. Long term we are expecting a move back up, but with the deluge of earnings we may have to revise our target, time will tell.
Euribors spreads have come off over the last few days, with spreads especially near the front off 3 to 4 ticks of its monthly highs. Lately volume has been very thin, as we wait for the next steps by the ECB. I've been playing the range over the last few days, with an emphasis on the red to green months, as there are a few more clear cut opportunities there.
As I finish writing this stocks are pushing through highs again on expectation of some good numbers from CITI, lets wait and see...

Bund Technicals

After we broke 122.45 on Tuesday, as we expected we gapped up higher on wednesday. We gapped up to 122.75 and reached a day high of 123.10 before coming off again as US stocks began to rally on FED beige book assessment. Intraday we formed a head and shoulders formation, with resistance at the shoulder at 122.85 and a floor at around 122.70. Looking at this short term, I would expect a test of the 122.45 level closing the gap from yesterday morning, before making a move up medium term towards 124.00.

Fundamentally speaking this longer term view can be supported as it seems increasingly likely ECB will cut further.
Todays we will have earning from JP Morgan, which will set the tone for stocks today. It is likely they will also show that things are getting better, but the real test will be when Citi report as they were given the most bailout money and previously in the most danger of going under. We shall see how it pans out...

Stock market tumbles

Stock markets took a tumble today after some real bad retail sales numbers. Before the numbers they were up again and the numbers gave everyone a reminder that not all is well yet. We settled below 8000 on the Dow which could prove to be significant going forward.
Whilst there was some action in stocks, bonds action was very lacklustre with very poor liquidity throughout. Trading Euribors at the moment is a bit of a nightmare, reminds me of the old TED spread days. I'm hoping it picks up as I put today down to easter weekend hangover.
Bunds ended the day at 122.48 finishing near the high of the day. We broke out of the intraday resistance at 122.45 in late trading, and this could be a floor for tomorrows action. I would expect the rally in bunds to continue in the next week inching us closer to the 124 target.
Tomorrow we could be looking at more weakness in stocks opening up after a dissapointing number from Intel, shares are down 5% in after hours.