Bloomberg:
- UBS Says Junk-Debt Bubble Just an Economic Slowdown From Popping. Investors that lend to junk-rated companies aren’t being compensated for the looming credit shakeout that could push defaults to record highs, according to UBS Group AG credit strategists Matthew Mish and Stephen Caprio. "There is a bubble in speculative grade credit," Mish and Caprio wrote in an April 11 note. "Simply put, clients were not being compensated for the credit risk." A slowdown in U.S. growth could cause the bubble to pop, stressing the lower-quality companies that constitute almost half of the universe of speculative-grade bonds and loans. Investors that crowded into the debt could suffer massive losses, Caprio said in a phone interview. The strategists didn’t put a time frame for the bubble’s bursting. As the bubble bursts, speculative-grade companies could find it even more expensive to borrow. Investors have already grown concerned about weakening credit quality and have started to exercise caution: high-yield issuance is down 53 percent this year and bonds carrying some of the lowest grades, namely CCC ratings, are yielding 15.2 percent, according to UBS, even after a rally during the second half of last quarter. The recent junk-bond rally ignores what the strategists see as "material" risks in the universe of high-yield bonds and loans, which they say is more leveraged than it was in the late 1990s.
- German `Sideshow' Sniping at ECB Shows Euro Area Stuck in a Rut. German discontent toward the European Central Bank is rising -- and the feeling seems to be mutual. Days before Group of 20 and International Monetary Fund meetings in Washington, German Finance Minister Wolfgang Schaeuble has suggested that ECB President Mario Draghi shares the blame for the rise of populist parties. With mainstream representatives piling on the opprobrium, ECB officials are showing exasperation that they’re under attack from politicians who have failed to upgrade the euro area’s economic foundations. While a German government spokesman said on Monday that highlighting the dangers of ECB policy is “legitimate,” others are warning that it’s symptomatic of a dangerous lack of euro-area consensus. From discord over refugees to a standstill on economic policy management, German voters and the ECB are frustrated over what they see as the broken promises of others.
- Former Yellen Adviser Proposes Sweeping Reform of Fed System. A former aide to Federal Reserve Chair Janet Yellen has broken ranks with his former employer and issued a blueprint for a sweeping reform of the U.S. central bank, including regular government audits and shorter term limits for policy makers. Dartmouth College professor Andrew Levin targeted four areas of change for the Federal Reserve system: make the Fed a fully public institution; ensure the process of picking regional Fed presidents is transparent; set seven-year term limits for regional presidents and Board governors; and make the entire Fed subject to external review.
- Goldman Has Three Reasons to Be Worried About Stocks This Earnings Season. (video)
- McDonald's(MCD) and Its 267% Rally Get No Respect From Wall Street.
Zero Hedge:
- Chesapeake(CHK) Forced To Pledge Entire Company As Collateral To Preserve Existing Credit Facility. (graph)
- Silver Surges Most In 6 Months As Hedgers Cover. (graph)
- Earnings Implosion Looms Amid The Illusion Of "Permanent Liquidity". (graph)
- Supply Chain Slump "Worse Than The Great Recession". (graph)
- ECB Scrambles To Calm A Furious Germany: "Helicopter Money Was The Straw That Broke The Camel's Back".
- Putting Today's "European Banks Are Fixed" Bounce In Context.
- Deutsche Bank Says World "Past The Point Of No Return" In The Default Cycle.
- Iran Releases Video Showing Arrival Of First Russian S-300 Missile System.
Business Insider:
- The hottest investment product is going to make mutual funds extinct.
- Another huge bank heist in China is a warning that we're about to see its stock market get wild again.
- Tesla(TSLA) is voluntarily recalling about 2,700 Model X SUVs for a seat problem.
- The American consumer's optimism is fading. (graph)
FiveThirtyEight:
- Trump Is The Weakest GOP Front-Runner In The Modern Era. (graph) Trump’s 37 percent of the cumulative primary vote and 46 percent of delegates won so far may sound impressive, but his percentages make him the weakest Republican front-runner, at this point in the process, in decades.
- AP-GfK Poll: Americans Trust Clinton Over Trump. In a stark warning for Donald Trump as he eyes a possible general election showdown with Hillary Clinton, Americans trust the Democratic front-runner more than the Republican businessman to handle a wide range of issues — from immigration to healthcare to nominating Supreme Court justices. Even when asked which of the two candidates would be best at "making American great" — the central promise of Trump's campaign — Americans are slightly more likely to side with Clinton, according to a new Associated Press-GfK poll. Some examples of voter preference when asked which of the two they would trust to do a better job on:
The Telegraph:
- Olivier Blanchard eyes ugly 'end game' for Japan on debt spiral. Japan is heading for a full-blown solvency crisis as the country runs out of local investors and may ultimately be forced to inflate away its debt in a desperate end-game, one of the world’s most influential economists has warned. Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan’s public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.
- AEP: Beijing 'must devalue yuan by 15pc' to avert crisis. A top adviser to the Chinese government has warned that Beijing risks a currency blow-up akin to Britain's traumatic ordeal in 1992, if it continues trying to defend its exchange rate peg amid a deepening deflation crisis.
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