Bloomberg:
- BOJ Seen Failing to Tame Volatility as Sale Slumps. Expectations for the widest bond price swings in more than four years and the weakest demand at an auction in nine months added to signs of waning debt market confidence in Bank of Japan Governor Haruhiko Kuroda. Implied volatility of Japan’s 10-year note futures, a measure of expected moves used to price options, climbed to 7.23 percent yesterday, the highest since November 2008, according to data compiled by Bloomberg. A sale of 20-year debt yesterday drew the lowest demand since August 2012. Expected price fluctuations for U.S. Treasury futures rose to 5.06 percent from 3.61 percent on April 30.
- Abe Adviser Tells S. Korea to Cope With Yen Not Blame Japan. Koichi Hamada, an economic adviser to Japanese Prime Minister Shinzo Abe, told South Korea to adjust its own monetary policies if officials are concerned at the effects of a yen weakened by unprecedented easing.
- Shadow Bank Crackdown Halts Record Junk Narrowing: China Credit. The yield premium investors demand to buy China's riskiest bonds is widening, ending a record five-quarter run of declines, after a crackdown on shadow banking strained corporate finances. The yield gap on three-year AA- notes over AAA debt jumped 15 basis points to 137 since March 31, after narrowing 147basis points from the end of 2011, Chinabond indexes show. Chinese regulators are forcing trust funds and wealth management plans to shift assets into publicly traded securities, robbing property developers and local-government finance vehicles of so-called shadow banking funds.
- China Credit-Bubble Call Pits Fitch Against S&P. Chinese banks are adding assets at the rate of an entire U.S. banking system in five years. To Charlene Chu of Fitch Ratings, that signals a crisis is brewing. Total lending from banks and other financial institutions in China was 198 percent of gross domestic product last year, compared with 125 percent four years earlier, according to calculations by Chu, the company’s Beijing-based head of China financial institutions. Fitch cut the nation’s long-term local-currency debt rating last month, in the first downgrade by one of the top three rating companies in 14 years. “There is just no way to grow out of a debt problem when credit is already twice as large as GDP and growing nearly twice as fast,” Chu, 41, said in an interview. Her views have struck a nerve. “Everyone is talking about credit -- about the credit cycle, leverage and credit-quality problems,” said Stephen Green, head of Greater China research at Standard Chartered Plc in Hong Kong, adding that there’s not enough good data available. “It’s a big black box, and it’s quite scary.”
- China Growth Outlook Cut by IMF as ‘Decisive’ Reforms Urged. The International Monetary Fund lowered its forecasts for China’s growth and said making “decisive” policy changes would put the economy on a more sustainable path.
- Asian Stocks Advance for Second Day on U.S. Data. Asian stocks rose for a second day after improving U.S. consumer confidence and home-price data bolstered optimism in the world’s largest economy. The Australian dollar weakened and the yen strengthened. The MSCI Asia Pacific Index added 0.2 percent by 11:33 a.m. in Tokyo. Japan’s Topix Index advanced 1 percent.
- Rebar Trades Near Lowest in 6 Months on Weak Iron Ore Prices. Steel reinforcement-bar futures were little changed near the lowest level in six months after iron ore prices fell and Chinese Premier Li Keqiang indicated a shift from rapid expansion to stable growth. Rebar for delivery in October on the Shanghai Futures Exchange fell as much as 0.7 percent to 3,465 yuan a ($565) a ton, the lowest level for a most-active contract since Nov. 30, and was at 3,489 yuan at 10:15 a.m. local time. Futures are set for a fourth monthly decline.
- Russia’s Syria Missile Sale Signals Protracted Conflict. Russia’s decision to sell advanced anti-aircraft missiles to Syria complicates efforts to find a swift diplomatic resolution to that country’s civil war and underscores the persistent strains in U.S.-Russian relations. Moscow’s announcement yesterday came less than 24 hours after U.S. Secretary of State John Kerry met Russian Foreign Minister Sergei Lavrov to discuss plans for peace talks on Syria and a day after the European Union lifted its arms embargo on Syrian rebel groups.
- Apple's(AAPL) Cook Hints at Wearable Devices. Apple Inc. Chief Executive Tim Cook, defending its prowess as a tech trend-setter, hinted that wearable devices may play a role in future product plans.
- Curious IRS Timing. Did the tax agency also target groups that support Israel? The IRS has admitted targeting groups that wanted to speak on issues during the 2012 election season. But did the agency also target tax-exempt groups that opposed Administration policy priorities?
- California Dems push anti-fracking bills, aim to curb potential oil bonanza. California is on the verge of a new gold rush. Expanded hydraulic fracturing -- or "fracking" -- at the Monterey Shale formation is sparking estimates that 15 billion barrels of oil could be accessed, along with millions of jobs and huge contributions to the domestic energy supply. Even the state's green-friendly Democratic governor, Jerry Brown, says "the potential is extraordinary." But standing in the way is a flurry of anti-fracking bills. At last count, 10 were on the table, all introduced by Democrats seeking tighter controls over the controversial technology.
- Issa subpoenas State Department for Benghazi documents. Republican Rep. Darrell Issa issued subpoenas Tuesday for a host of State Department emails and other communications on the Benghazi terror attack, signaling that the Obama administration's recent document dump would not satisfy congressional investigators. Issa, chairman of the House Oversight and Government Reform Committee, claimed in a letter to Secretary of State John Kerry that the department is still "withholding documents."
- The Fed vs. Congress: Who Is Enabling Whom? The dominant narrative about economic policy has it that the Federal Reserve's easy money policies are enabling congressional intransigence and partisanship. But this might be exactly backward.
- Australia's Dollar Slides to 19-Month Low. The Australian dollar tumbled to its lowest level since October 2011 in early Asia trade on Wednesday, extending this month's sharp slide against a broadly-stronger U.S. currency. The latest catalyst for move in the Aussie dollar was stronger U.S. economic data overnight that pushed the greenback higher against all major currencies. Data published on Tuesday showed consumer confidence rose in May to its highest level in more than five years.
- Chart Of The Day: Crushed US Consumer + All Time High New Home Prices = Record Housing Bubble. (graph)
- JOMO Arigato Mr. Kuroda. (graphs)
Reuters:
- Another investor to pull money from SAC as probe continues. Ironwood Capital Management plans to pull about $100 million from embattled hedge fund SAC Capital Advisors, adding to the list of problems for billionaire trader Steven A. Cohen.
- Money from China? Then "Made in China", shipowners told. Chinese banks have sharply increased loans to global shipowners as European lenders retreat from the market but some are driving a hard bargain: the finance often comes with the condition that vessels be built in China.
- US housing lift could crimp Fed buying. The largest rise in house prices for seven years and a surge in consumer confidence have added to a fast-improving US economic outlook, increasing the chances the Federal Reserve will slow its $85bn-a-month in asset purchases.
- China May Expand Property Tax Trial by Large Scope. China's property tax trials may be expanded by a "relatively large scope" targeting newly purchased homes, citing a person familiar with the matter. The effects of a property tax in Shanghai and Chongqing isn't clear after two years of trials, the person said.
- None of note
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 90.75 -3.0 basis points.
- FTSE-100 futures -.65%.
- S&P 500 futures -.04%.
- NASDAQ 100 futures +.02%.
Earnings of Note
Company/Estimate
- (CHS)/.36
- (TFM)/.44
- (BWS)/.22
- (DSW)/.89
- None of note
- (WFM) 2-for-1
- The Fed's Rosengren speaking, 5Y T-Note auction, Bank of Canada rate decision, Germany Unemployment/CPI data, weekly MBA mortgage applications report, weekly retail sales reports, Sanford C. Bernstein Strategic Decisions Conference, Cowen & Company Tech/Media/Telecom Conference, KeyBanc Industrial/Auto/Transports Conference and the Citi Consumer Conference could also impact trading today.
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