ZeroHedge RSS Feed

The US Consumer Is So Strong, Family Dollar Is Closing 370 Stores

First, they came for the upper middle-priced retailers when Macy's shut down 5 stores and fired 2500... and nobody said anything.

Then, they came for the middle-priced retailers when JCPenney announced it would shut down 33 stores and fire 2000... and nobody said anything.

Then, they came for the lower-priced retailers when Radioshack celebrated the one year anniversary of shutting down 500 stores by shutting down 500 more...  and nobody said anything.

Today, as we plumb the depths of the US economic food-chain in that last bastion for the impoverished US consumer, dollar stores, we find that that staple for low-cost "everything" Family Dollar, which operates 8,100 stores around the country, will be shutting down 370 stores "as it tries to reverse sagging sales and earnings." It was not clear immediately how many thousands of workers would be affected by the store shuttering. We assume "many to quite many."

And what do they say? Why, that "the US economic recovery is obviously stronger than ever" of course!

From AP:

The retail chain follows competitors in highlighting the split between shoppers who are enjoying an improving economy and those being left behind.


Dollar General, the nation's largest dollar-store chain with 11,100 locations, offered a weak profit outlook last month after reporting weak fourth-quarter sales. And Dollar Tree, which operates about 5,000 locations, missed profit expectations for the holiday quarter in February.


Family Dollar has stumbled even more than its rivals because it has made mistakes in pricing, merchandising and the locations of its stores, analysts say. Still, the industry's problems are a big departure from a few years ago, when Family Dollar and other chains packed in customers and expanded rapidly by catering to cash-strapped people during the Great Recession.


But that expansion has spread shoppers thin. And retailing giant Wal-Mart is muscling in, too, by accelerating its growth in small stores, while increasing its offerings of small packages that are easy on the budget.

It wouldn't be a pathetic management team if it didn't scapegoat the weather instead of casting blame where it truly lies: an incompetent Federal Reserve that has done nothing for the recovery of the "non-1%" and sure enough:

Family Dollar Chairman and CEO Howard Levine told investors on a call that the poor weather led to numerous store closings, disruptions in merchandise deliveries and higher-than-expected utility and maintenance expenses.

Oh so, the reason revenue dropped 3.8% in the quarter was snow. So why did revenue drop 2.8% in the last quarter of 2013? Fear of imminent snow?

Levine did retain a tiny shred credibility when he added that "shoppers' financial constraints and a discount-driven holiday season also played a role." A rather massive one.

What other mistakes did management make?

Family Dollar had shifted away from its focus on $1 items and had offered too many temporary promotions, retail consultant Craig R. Johnson said. The company now says it wants to go back to focusing on everyday low prices and $1 items to restore confidence it offers a predictably good deal every time a shopper visits the store.

Yup: the US recovery is so strong, consumers can't even afford to spend $1 on groceries. And now buy stawks. The Fed demands it.

Finally, we are not being entirely fair. It is not every retailer that is getting crushed. Only those catering to the non 1% of course. "The retail chain follows competitors in highlighting the split between shoppers who are enjoying an improving economy and those being left behind." Indeed, as we first showed several months ago in "Shopping With Bernanke: Where QE Cash Ends Up Tells Us Who Benefited"...


Now That U.S. & China Have Picked The Low-Hanging Fruit, Peak Everything Looms

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

With no plan to manage an economy in which expanding credit no longer generates growth, the two nations are rapidly reaching Peak Everything.

Let's call the strategy of picking all the low-hanging fruit in an economy Plan A: you know, expanding credit, lowering interest rates, building infrastructure, fueling speculative frenzies, all the good stuff that fans the flames of "growth."

Now that the central banks and political leadership of the U.S. and China have plucked all the low-hanging fruit, they have no Plan B. With no plan to manage an economy in which expanding credit no longer generates growth, the two nations are rapidly reaching Peak Everything:


  • Peak Leverage
  • Peak Phantom Collateral
  • Peak Mal-Investment
  • Peak Ghost Malls
  • Peak Doing More of What's Failed Spectacularly
  • Peak Propaganda
  • Peak Smog
  • Peak Housing Bubble
  • Peak Keynesian Cargo Cult
  • Peak Clueless Leadership
  • Peak Central Bank Manipulation
  • Peak Phony Statistics
  • Peak Debt-Serfdom
  • Peak Crony-Capitalism
  • Peak Group-Think
  • You get the idea.

Gordon T. Long and I discuss the ramifications of the low-hanging fruit having been plucked in this 26-minute slide presentation:

Of related interest:

What Happens After the Low-Hanging Fruit Has Been Picked? (April 2, 2014)


The Deer Is Back - Nasdaq Suffers Biggest Loss Since Nov 2011

But the pretty people on TV said the Fed Minutes proved they were the most dovish ever and initial claims hit recovery lows... What a total disaster - Equity markets peaked within a few minutes of the open and never looked back - yesterday's "Fed Cat Bounce" gave way to Really Red Thursday...

  • Biotechs -6% worst day since Aug 11
  • Nasdaq -3.2% worst day since Nov 11
  • Russell 2000 -3.1% worst day in 12 months
  • S&P "Growth" -2.5% worst day in 10 months
  • Financials -2.2% worst day in 10 weeks
  • Social Media ETF -4% worst day in 11 months
  • VIX +17% biggest rise in 3 months
  • Nikkei knackered... Hits 14,000 - down 14.25% from highs to six month lows

Nasdaq and Russell are -6.5% from recent highs and the S&P is -3.5% from its highs...


The question is - why did the Fed feel the need to act more dovish? That's why growth is getting slayed and beware the head fakes.

Fed Cat Bounce failed... And an UGLY CLOSE


As the post-FOMC meeting losses are mounting...


And the "growth" stocks have been monkey-hammered since Tarullo said they were in a bubble...


"Investors" (and Hitler) are shocked and stunned that High-Beta works both ways...


Away from stocks, Bonds rallied (with 10Y breaking the crucial 2.64% level)


Commodities rallied


The USD sold off


We leave it to Bob Pisani to sum it all up:

"the bears have the upper hand but people still think it will turn around"

But then again, there was this cherry from some "floor trader":

"it's painful if you own 'em, but you owned 'em a lot lower so you're not really in that much pain"

Tell that to Social Media stockholders...


Charts: Bloomberg

Bonus Chart: GMACandy Crash


Bonus Bonus Chart: Nikkei knackered... Hits 14,000 - down 14.25% from highs to six month lows


Bonus Bonus Bonus Chart: The Nikkei is at its cheapest to The Dow in 15 months...


* * *

Finally, something else of note. Earlier today Nanex believes it may have found another new, if not necessarily rogue, algo operating in the market. According to the analytics firm, multiple orders for 750 eMini contracts appeared on 2 price levels (at least 3, and as many as 8 separate orders of 750 contracts on each price level). This appears to have been to induce the market slightly higher (lower) when the large orders were to buy (sell).


Another occurrence about 20 minutes later.

The Flash Crash in May 2010 was created by HFTs, and according to some, the quote stuffing bottleneck may have been intentional. How long until someone spoofs HFTs and forces them to be the reason for the next flash crash, in the process redirecting public fury from the Marriner Eccles central planners and into nameless, faceless vacuum tubes?

Thursday Humor: The Other Meaning Of Getting A "Brazilian"

With mere weeks to go until millions descend on the Carnivalic streets of Rio for The World Cup, it seems the term "to get a brazilian" has a new meaning. As this poor woman discovered, while being interviewed live on Brazilian TV, while complaining in the clip about the lack of police presence near the station, a would-be mugger approaches her from behind and rips off what appears to be a gold necklace. Welcome to the safe streets of Brazil, world...


No, It's Not A "Stock Picker's Market", Whatever That Means

One of the phrases which we have done our best to bury over the last few years has been the absolutely idiotic statement "money on the sidelines" (and right behind it "more sellers|buyers than buyers|sellers"). Sadly a group of persistent, if clueless bobble-headed automatons still insist on using it. So be it. Today, however, we will focus on yet another absolutely idiotic phrase: "a stock picker's market." Leaving aside the linguistic stupidity of this expert "assessment" (because nothing says fundamental equity analysis like picking non-stocks), the mere facts flat out refute any suggestion that there is any material, or frankly, any dispersion, i.e., the proverbial stockpickeryness. But don't take our word. Here is Goldman's.

From David Kostin:

On the stock selection environment: Contrary to the belief of many market participants, stock return dispersion has been extremely low during the  past one and three months, ranking in the 1st percentile versus the past 30 years. Dispersion has been unusually low in Consumer Discretionary and Info Tech. Stock picking is always challenging. Low dispersion means it has been more difficult than usual. Only 42% of core mutual funds is beating benchmarks.



So dear clueless pundits: please stop using such idiotic phrases when you have no idea what you are talking about.

Or, on second though, please keep on doing it. That way you make it very easy for the rest of us to weed out who is even more clueless than most when it comes to market punditry.

Marc Faber Warns "The Market Is Waking Up To How Clueless The Fed Is"

"I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash," warns a somewhat excited sounding Marc Faber, adding that he thinks "it will be worse."


The pain is just getting started as Faber notes that "the market is slowly waking up to the fact that the Federal Reserve is a clueless organization." Internet and Biotech sectors (growth stocks) are "highly vulnerable because they're in cuckoo land in terms of valuations," and fully expects the selling to spread as The Fed "have no idea what they're doing. And so the confidence level of investors is diminishing," and that means we will see a major decline.


Jim Flaherty, Canada's Former Finance Minister, Has Died

It was less than a month ago that we reported on the surprise resignation of Canada's finance minister which while officially attributed to a wish to begin "another chapter" in his life, we said "there is rife speculation that it was indeed his health that was the reason for this unexpected resignation." Sadly, today it was proven that it was indeed Flaherty's health that had forced this surprising decision, following news that the former finance minister has passed away.

#Breaking news: Jim Flaherty, former Finance Minister, has died. Story to come

— The Globe and Mail (@globeandmail) April 10, 2014

Statement from Jim Flaherty's family:

— Josh Wingrove (@josh_wingrove) April 10, 2014

China Premier Li: "No Major Stimulus"

Last night's devastating trade data from China had the bad-news-is-good-news crowd chomping at the bit over the next massive stimulus that 'surely China will unleash...because they've got so much in reserves'. However, as we have explained previously, Chinese premier Li Keqiang destroyed those expectations last night when he ruled out major stimulus to fight short-term dips in growth. Unlike his 'desperate for a short-term fix' colleagues in the west, Li stated more thoughtfully (and perhaps more knowingly given his country's pending credit bubble crash), "we will instead focus more on medium- to long-term healthy development."


As Reuters reports, even as big falls in imports and exports data reinforced forecasts that the world's second-largest economy has slowed notably at the start of 2014, Chinese Premier Li Keqiang ruled out major stimulus to fight short-term dips in growth.

Li stressed on Thursday that job creation was the government' policy priority, telling an investment forum on the southern island of Hainan that it did not matter if growth came in a little below the official target of 7.5 percent.


"We will not take, in response to momentary fluctuations in economic growth, short-term and forceful stimulus measures," Li said in a speech.


"We will instead focus more on medium- to long-term healthy development."


His comments are among the clearest yet on the government's plans for the economy, which has rattled global investors this year with a surprisingly lackluster performance.

Of course hope spring eternal among the stimulate-or-die, band-aids forever strategist crowd...

The almost unabated run of disappointing data this year has fuelled investor speculation the government would loosen fiscal or monetary policy more dramatically to shore up activity.


This kind of collapse in data would be a huge buying signal for Western stocks...


But authorities so far have resisted broad stimulus measures. On Wednesday, the top economic planning agency said the government had less room to underpin growth because it did not want to inflate local debt risks. And now Premier Li's more blunt words should make it clear that global investors riding the wave of moar free money to China's shores should look elsewhere.

The Problem With HFT Explained In One Chart

For all the sudden fury at HFT in the aftermath of the Michael Lewis 60 Minutes interview which merely served to underscore Goldman's dramatic U-turn on all things market structure-y, the reality is that, as we have explained over the years, high frequency strategies are not all bad and not all are the latency arbitrage, momentum ignition, liquidity detection-type predators and parasites we have repeatedly shone the spotlight on years before anyone else paid attention.

Indeed, as Blackrock points out in its just released paper "US Equity Market Structure: An Investor Perspective" there are more constructive HFT strategies, mostly dealing with pure play liquidity-providing rebate collection, and there are the "less constructive" ones - or all those that in one way or another end up hurting someone else, be it the retail or institutional investor.

And just as there is a scale of "usefulness" of HFT strats, so there is a gradient of strategy profitability to HFT operators.

In the chart below we have shown Blackrock's original chart, to which we added the shaded box indicating the shift from least profitable strategies, those that also happen to be the most constructive if least rewarding, to the most profitable ones, obviously the ones that are "least constructive."

The problem then becomes readily apparent: without any gates to prevent HFT (ab)users from positioning themselves anywhere they wish in the constructiveness/profitabilty spectrum, it goes without saying that everyone will immediately flock to the most profitable, and hence, least constructive and most predatory, HFT strategies.

It also means that while in theory HFTs can and should provide liquidity, they rarely if ever do as most of them are far more focused on such high IRR activities as latency arbitrage, flash orders, momentum ignition, liquidity detection and headline trading - none of which validate the main claim of HFT proponents: that they provide liquidity.

It is this conflict that has to be addressed by the clueless, coopted and complicit regulator that is the SEC if there can be any hope that the retail investor will ever regain some sense of fairness about what right now, is certainly an "abnormally" rigged market (as opposed to the normally rigged, which as all insiders know, it is most of the time).

The HFT problem in a nutshell below.

Nasdaq Biotech Index Crucified, Falls Most Since August 2011

Yesterday's "best day in a year" was the ultimate Fed cat bounce as Nadaq Biotech stocks are collapsing today - approaching the crucial 20% bear market drop. With a loss of over 5.5%, this is the biggest drop since August 2011 and has the index very close to the critical 200-day moving-average support. The Biotechs are now down 2% year-to-date at new 4-month lows.



Charts: Bloomberg

Donetsk Creates "People's Army"

With tensions rising ever faster in eastern Ukraine, the anti-government (pro-Russia) movement in Donetsk has taken dramatic steps to bolster itself by creating a "people's army," or National Army of Donetsk. As RT reports, masked men, who are mostly civil volunteers, but also police and army defectors, say they “defend their motherland from the fascist army that’s going to kill them.” They also demand “a referendum to be independent from Kiev” and are in favor of “being with Russia.”

The Ukraine forces are moving in on Donetsk...


PHOTO: #Ukraine military trucks on their way to #Donetsk

— RT (@RT_com) April 10, 2014


And now the people are organizing...

#Donetsk The People's assembly of the #Donbass separatist republic just announced in presser the creation of a "People's army" #engrenage

— Stéphane Siohan (@stefsiohan) April 10, 2014

The importance of this move is the pro-Russian local forces are now organized to repel any Ukraine (government) attempts to re-take government buildings - and conjures ugly memories of the hell that Kiev suffered for multiple weeks.

As Dontesk protesters prepare...


Strong 30 Year Auction Prices At Lowest Yield Since June

Yesterday's 10 Year auction may have been surprisingly weak, perhaps concerned about what the subsequent FOMC minutes would reveal (as it turned out the minutes couldn't have been more dovish - just as everyone knew would be the case - and sent 10Y yields sliding) but today's 30 Year reopening (Cusip: RE0) auction was quite brisk, with the high yield of 2.535% stopping through the When Issued of 2.537% by 0.2 bps. And for those who have been living under a rock and unfamiliar with the epic flattening in the yield curve, today's 30 Year was the tightest pricing since the 3.36% yield last seen in the auction from June 2013.

Other internals: the Bid To Cover rose to 2.52, the highest since January, while the allotment was roughly in line as expected with Direct Bidders taking down 17.9%, Indirects 43.3%, and leaving 38.8% for the Dealers who can't wait to flip this CUSIP to the Fed as the end of QE rapidly approaches (at least until the S&P "crashed" by 10%).

The full breakdown:

S&P Plunges Back To Negative Year-To-Date

It appears yesterday's "Fed Cat Bounce" was exactly that. While the momos are making headlines, selling pressure is broad-based now and the S&P has just joined the Russell, Nasdaq, and Dow in the red year-to-date... "Growth" stocks are at the lows of the year relative to "Value"

click image for huge legible version...


With "Growth" at its lows for the year versus "Value"

Is The Fed To Blame For The Bursting Of The Tech Bubble?

Correlation is not causation but...



As a reminder Fed Governor Dan Tarullo (in charge of supervision and regulation) also warned (on Feb 25th):


How soon we forget?

"expectations fostered by forward guidance of continued low rates, may be incentivizing financial market actors to take on additional risks to boost margins, thereby contributing to unsustainable increases in asset prices and a consequent buildup of systemic vulnerabilities."

Don't fight the Fed!

And what he said last night...


10 Year Breakdown To 2.4% Possible BofA Warns

As one well-known trader noted - referring to the current move in the US Treasury complex - "rubber, meet road."With the death cross (50DMA crossing below the 200DMA) for bond yields and a crucial trendline having been tested now numerous times (building up its importance), it seems we are about to find out just how much "growth" stocks really do reflect the reality of 'ungrowth' in bonds and vice versa. A break of 2.64% in 10Y yield could be a critical floodgate the Fed does not want opened. As BofAML's Macneil Curry warns, 10Y Treasury bears beware, a break below this level opens up a drop to 2.399%.


A close-up on the trends (and death cross)...

h/t @Not_Jim_Cramer


As BofAML's Macneil Curry warns US Treasury Bears Beware...

US 10yr yields are approaching PIVOTAL resistance at 2.629%/2.608%. Against here we remain bearish 10s.

HOWEVER, a break below would say we are wrong, exposing the Oct'13 low and multi-year pivot zone between 2.469%/2.399%



And he is fearful that USDJPY is about to break support also

Greek Bond Final Term Sheet: Upsized, Eight Times Oversubscribed, And Yielding 4.95%

"Fear Of Missing Out" - that is the only way one can explain the irrational idiocy with which asset "managers" are scrambling to allocate other people's money into today's "historic" Greek (where unemployment just printed at 26.7%) return to the bond market, and which according to Greek PM Venizelos was eight times oversubscribed, or far more demand than for the Facebook IPO. Ironically, while we joked earlier this week, when the Greek 5Y was trading in the 6% range that the new bond would issue at 3%, we were not too far off on the final terms which were largely expected in the mid-5% range. Instead, Greece shocked everyone when it announced that the avalanche of lemmings had made it possible for Greece to issue debt at a sub-5% yield, and a 4.75% cash coupon! Here is the final term sheet.

  • Issuer: The Hellenic Republic
  • Amount: €3 billion euros ($4.15 billion, upsized from €2.5 Billion
  • Maturity: April 17, 2019
  • Tenor: 5 Years
  • Yield: 4.95%
  • Coupon: 4.75%
  • Rating: Caa3/B-/B-
  • Underwriters: BofAML, DB, GS, HSB, JPM, MS
  • Governing Law: English

Additionally, as the Greek finmin said, "Demand for the bonds was very strong. Participation of foreign institutional investors is expected to approach 90 percent." And participation of other people's money will reach 100%.

Goldman's post-mortem:

Earlier today the Hellenic Republic announced its intention to access international bond markets for the first time since early 2010. Greece’s attempt to regain market access is a result of a combination of macro drivers, which we have highlighted since mid-2012 and which remain in place:


1.    Greece is gradually exiting a deep recession, having shed almost 25% of its nominal GDP between late 2009 and late 2013. At the onset of the crisis, the economy featured large imbalances, which pointed to the economic pain set to follow. To mention a few: a very wide primary budget deficit (near 10% of GDP), a current account deficit amounting to almost 14% of GDP, uncompetitive levels of unit labour costs, and significant frictions in the operation of labour and product markets.


The structural adjustment programme for Greece, beyond its significant cost in terms of economic activity, has helped address some of these imbalances, at least in part. The country now runs a primary surplus, which currently hovers north of 1.5% of GDP and which different official sector estimates place north of 4% on a structural basis. In addition, the current account deficit has been eliminated, unit labour costs are at lower levels than before the Euro adoption relative to EMU averages, and there have been elements of reform in labour and product markets.


As a result, the outlook for the Greek economy is starting to reverse. Investors are expecting mildly positive growth rates and are reducing the required premia to lend the government of the country.


2.    After significant losses for bond investors and for governments, Greek debt has been restructured substantially. Despite the sharp rise in the ratio of debt to GDP (north of 175% of GDP), interest payments for Greek debt have been reduced so that the average cost of borrowing remains at or below pre-crisis debt servicing levels (around 4-4.5% of GDP) and the largest part of this is deferred cash payments (and hence requires no market financing to cover). By 2016, more than 80% of Greek debt will be in official hands. And the agreement between Greece and its EMU counterparts is that further debt relief may become available – possibly in the form of maturity extensions of already long-dated official loans and interest burden reductions. Therefore, it is becoming increasingly clear that the probability of default for the Greek foreign law government bonds is low and declining.


3.    The Greek government has regained credibility by showing willingness to adopt reforms, which, although unpopular, have helped the country’s recovery prospects. Equally, the EMU governments have shown uniform support towards that effort, largely smoothing the relationship between the country and the Euro area core. So, although Greece's debt levels are still high, the probability of a disorderly solution has declined

It wasn't all lunacy. According to Kleinwort Benson, the pricing was "irrational." From Bloomberg:

  • New 5Y GGB should have been priced 100bps higher to be at fair value given Greece’s credit risk, Fadi Zaher, head of bonds and currencies at Kleinwort Benson, says in interview.
  • Greek sale said to exceed EU3b as nation ends 4-year exile from international markets
  • Pricing of bond is “better than what the Greeks themselves had expected:” Zaher
  • Now is ideal time for Greece to issue, amid investor “euphoria” over euro area; sale shows resumption of confidence in country
  • Kleinwort Benson chose not to buy because of medium- and longer-term risks surrounding nation’s high debt levels, even though bond may perform well in near term
  • Cites example of Argentina: “They went through different phases of debt restructuring, and the problems resumed”
  • GGBs don’t look attractive in terms of risk-adjusted returns

Who cares. The bubble is growing, the music is playing, and one must dance. Rinse. Repeat.

Frontrunning: April 10

  • J.P. Morgan's Dimon Describes Year of Pain (WSJ)
  • SAC Faces a Final Reckoning for 14 Years of Insider Scam (BBG)
  • New Standards for $693 Trillion Swaps Market Increase Risk of Blowup (BBG)
  • China says no major stimulus planned; March trade weak (Reuters)
  • As we said in 2012 would happen: Record Europe Dividends Keep $3 Trillion From Factories (BBG)
  • Blame it on the algo: Deutsche Bank Said to Find Improper Communication in FX Case (BBG)
  • Coke Sticks to Its Strategy While Soda Sales Slide (WSJ)
  • Ukraine’s Rust Belt Faces Ruin as Putin Threatens Imports (BBG)
  • RBC Joins Goldman in Suing Clients After Singapore Crash  (BBG)
  • Abe Rewrites Rules to Rouse Japan With Governance Revamp (BBG)
  • U.S. House panel to look at aluminum prices, warehousing (Reuters)
  • Brooklyn Apartment Rents Jump to a Record as Leases Surge (BBG)
  • Spain Borrowing at German Yields? It’s Possible, Thanks to U.S.  (BBG)
  • The princeling of private equity (Reuters)
  • Europe’s steelmakers remain under pressure despite rising demand (FT)


Overnight Media Digest


* For 13 years running, Americans have been drinking less Coke. Now Diet Coke sales are falling off a cliff. Globally, sales growth of soda is slowing amid concerns about sugar intake and obesity. The trends are industry wide, but it is especially bad news for Coca-Cola Co, a company that derives almost 75 percent of its global sales volume from carbonated soft drinks. (

* AT&T said on Thursday it is in advanced talks to bring speeds of up to one gigabit per second to six North Carolina cities, or about 10 times the current fastest options. (

* J.P. Morgan Chase & Co Chairman and Chief Executive James Dimon acknowledged that a series of legal headaches in 2013 evolved into "the most painful, difficult and nerve-wracking experience I have ever dealt with professionally." (

* Auto lender Ally Financial Inc's initial public offering priced at the low end of its expected range, raising some $2.38 billion for the U.S. Treasury Department. The deal marks the largest U.S.-listed IPO of the year and sharply reduces the U.S. government's stake in the former General Motors financing arm. (

* Hewlett-Packard Co agreed to pay $108 million to resolve bribery investigations spanning three countries, in a case involving bags of cash, jewelry and tours of the Grand Canyon. U.S. authorities on Wednesday gave a detailed view of corruption at HP, which pleaded guilty to violating the Foreign Corrupt Practices Act and agreed to the facts laid out by the government. (

* Greece plans to sell a new bond, and demand appeared strong among investors ready to look beyond the country's debt crisis. The country's desire to issue the bond, its first longer-term debt sale since its international bailout in 2010, was well known. But details of the planned offering and indications of healthy investor appetite spurred a rally Wednesday in Greece's existing securities. (

* Bank of America Corp agreed to pay at least $772 million to settle allegations it misled customers when marketing credit-card products promising to protect consumers against identity theft and job loss. The pact announced Wednesday is the fifth, and largest, settlement to date in a probe of banks' sales of credit-card add-on products. (

* For U.S. energy companies, it has been a simple and profitable strategy: spin off a piece of the business and secure a special tax treatment. Now, the IRS is wondering if some firms are pushing the popular tactic too far. It is conducting an internal review and taking a temporary break from giving guidance to companies looking to form or expand master limited partnerships. (

* Mars Inc agreed to buy Iams and other pet-food brands from Procter & Gamble Co for $2.9 billion, solidifying its position as the world's biggest pet-food company and effectively ridding P&G of a business that no longer fits with its goals. (

* Popular websites and millions of Internet users scrambled to update software and change passwords Wednesday, after a security bug in crucial encryption code was disclosed sooner than researchers had planned. Facebook Inc and Yahoo Inc's blogging site Tumblr advised users to change their passwords because of the so-called Heartbleed bug while Canada's tax agency shut its filing website as a precaution, weeks before its April 30 filing deadline. (



Russia's biggest steel company Evraz Plc warned that the crisis in Ukraine could hurt its business in 2014, as it reported a deepening in losses for last year.

The World Steel Association expects a pick up in manufacturing in Europe after six years of recession, and has forecast a 3.1 percent pickup in European steel demand. But European steel companies, plagued by high energy costs, remain wary.

A new regulatory study by The Pensions Regulator shows that employers could be charged 10 times more than competitors for running final-salary pension schemes.

In one of the biggest corporate criminal cases in Ireland, a jury cleared former Anglo Irish Bank Chairman Sean Fitzpatrick of charges associated with loans to family members of the region's business tycoon Sean Quinn.

Co-op Group's senior board member Lord Paul Myners, who has been facing criticism over a proposed restructuring of the group's board, has quit just a week before the group is scheduled to post its results.


* Bank of America Corp has been ordered to pay about $772 million in refunds to customers and fines to federal regulators to settle allegations that the bank used deceptive marketing and billing practices involving credit card products. (

* Bruce Karpati, a former Securities and Exchange Commission official, is joining the private equity firm Kohlberg Kravis Roberts & Company as its chief compliance officer, a person briefed on the matter said on Wednesday. (

* Top U.S. investment banks have recently instituted a change in their corporate culture telling their most junior employees to take a few days off a month or on the weekends. The banks are responding to fears across the industry that finance is losing its appeal for bright, ambitious college graduates. (

* Members of the Senate Judiciary Committee expressed concern on Wednesday that the proposed $45 billion merger of Comcast Corp and Time Warner Cable Inc would raise the prices consumers pay for cable television and high-speed Internet service while leaving them with fewer choices for video programming. (

* The Treasury Department on Wednesday sold a 20 percent stake in the once-embattled lender Ally Financial Inc via its initial public offering. The stock sale will raise about $2.4 billion for the government. (

* A bond insurer halted the bankruptcy proceedings for Detroit by offering to buy four treasures in the city's art museum. The non-binding proposals range as high as $2 billion, including a loan for that amount from a specialized firm that would use the art collection as collateral. Other parties have proposed buying the art collection, or parts of it. (

* Walmart Stores Inc plans to announce on Thursday that it is backing Wild Oats organic products, offering the label at prices that will undercut brand-name organic competitors by at least 25 percent. The move by Walmart is likely to send shock waves through the organic market, in which an increasing number of food companies and retailers are seeking a toehold. (

* Toyota Motor Corp on Wednesday announced a recall of nearly 6.4 million vehicles worldwide for problems with air bags that may not deploy or seats that could move in a crash. The recall, which includes nearly 1.8 million vehicles in the United States, brings Toyota's recall tally for 2014 to almost 2.9 million vehicles in the U.S. (

* When the Federal Reserve changed the guidelines for its stimulus campaign last month, it did not change its commitment to supporting the economy, according to an account of the decision that the Fed published on Wednesday. Janet Yellen, the Fed's new chairwoman, convened a secret meeting in early March to discuss the shift, the Fed disclosed on Wednesday. (

* American mutual fund investors with significant exposure to bonds issued by indebted companies in fast-growing economies may be at risk, the International Monetary Fund warned in a report published on Wednesday. Bonds issued by big companies in emerging economies have seen explosive growth in recent years after central banks around the globe started making extraordinarily large purchases of government and corporate bonds. (




* A major cybersecurity flaw called "Heartbleed" that exposes encrypted information to hackers has forced the Canada Revenue Agency to shut down its filing system and push back the deadline for online returns. The flaw has got major websites around the world to release software updates to patch a hole that leaves users' personal information vulnerable. (

* Canada's embassy in Beijing has spent about $175,000 in the past two years to buy crates of high-end filters for its staff. Embassy officials are also looking at compensation for workers whose stays in China stand to permanently damage their health. (

Reports in the business section:

* BlackBerry Ltd's Chief Executive John Chen said the company might consider exiting its handset business if it remained unprofitable. Chen, who took over the struggling company in November, said BlackBerry was also looking to invest in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications. (


* Conservative Party of Canada's efforts to push the Fair Elections Act has run into controversy. The secrecy surrounding the act, the failure to consult in advance of its drafting, the curtailment of debate after, the supreme indifference to legitimate criticism - all under the chilling oversight of the Minister for Democratic Reform, Pierre Poilievre, would be enough to make anyone nervous. (

* The Canadian Broadcasting Corporation may cut about 600 jobs as it grapples with a financial shortfall of $130 million to $150 million, according to a lobby group that watches the national broadcaster closely. (


* "Heartbleed", a cybersecurity flaw that got major websites around the world to release software patches, went undetected for two years, according to one of the organizations that helped identify it. The bug leaves behind no trace when it is exploited and it may take years before the extent of this security breach is fully known. (

* Activist investor George Armoyan has called for the removal of Sherritt International Corp Chief Executive David Pathe. Armoyan said some Sherritt insiders, including former directors, have indicated to him that there is a vacuum of leadership at the company. (



- State-owned enterprises, especially those owned by the central government, are likely to play an important role in launching large-scale investment projects aimed at stabilising economic growth this year, the paper reported, citing an unnamed source closed to the State-owned Assets Supervisory and Administration Commission.


- China's first private equity-style fund focused on futures investment started fundraising on Tuesday. The private equity product called "Donghang Finance Number One Seeds Asset Management Plan", which is operated by CES Finance, plans to raise 50 million yuan ($8.1 million).


- China's securities regulator will not restart equity initial public offerings in April because the agency is still in the process of drafting several new regulations, sources closed to the matter told the paper.

- China's major online peer-to-peer lending platform Ppdai raised around $50 million its second round of private fundraising, sources said.


- Executives at privately-owned companies complained forcefully about unequal treatment relative to state-owned firms at a roundtable discussion at the Boao Forum for Asia in Hainan, the paper reported in a front-page article.


- Beijing may impose strict traffic controls and suspend operations of polluting companies to reduce smog during the Asia-Pacific Cooperation Forum scheduled for later this year, said Zhuang Zhidong, deputy head of the Beijing Environmental Protection Bureau.


- Party cadres should be highly attentive to the ongoing "Mass Line" education campaign, an internal propaganda effort aimed at maintaining the common people's support for the party, said the paper, which acts as a mouthpiece for the ruling Communist Party.



The Telegraph



The eurozone debt crisis is deepening and threatens to re-erupt on a larger scale when the liquidity cycle turns, a leading panel of economists warned in a clash of views with German officials in Berlin.



Lord Wolfson, the chief executive of Next Plc, has waived his £4m bonus for the second consecutive year and awarded it to the clothing retailer's staff.

The Guardian



Lord Paul Myners tendered his resignation in the face of mounting opposition to his plan to reform the way the country's biggest mutual Co-operative Group is run.



The eurozone's creaking banking system poses a serious threat to global financial stability, according to the International Monetary Fund, which warned European leaders to accelerate plans to support weak banks and create a banking union.

The Times



Just Retirement, a specialist annuity provider, reported that the shock Budget measure "has had a material effect on individually underwritten annuity volumes", and warned that it would not meet the sales growth target of 7 per cent for its full year that had been flagged in February.



Royal Bank of Scotland inched closer to corporate normality yesterday after agreeing a deal with Brussels that paves the way for it to resume paying ordinary dividends and gives it more breathing space to complete a key disposal.

Sky News



Car insurance premiums are at a four-year low after a record 19 percent drop in the cost last year, according to's car insurance price index.



Investors are becoming dangerously reliant on rock-bottom interest rates, with many becoming so indebted they will face serious problems when borrowing costs rise, the International Monetary Fund (IMF) has warned.


Fly On The Wall 7:00 AM Market Snapshot


Domestic economic reports scheduled today include:
Jobless claims for week of April 5 at 8:30--consensus 318K
Import price index for March at 8:30--consensus up 0.2% from prior month
Treasury budget for March at 14:00--consensus deficit $36.0B



Akamai (AKAM) upgraded to Buy from Neutral at B. Riley
Alkermes (ALKS) upgraded to Buy from Neutral at Mizuho
AmerisourceBergen (ABC) upgraded to Buy from Neutral at ISI Group
BT Group (BT) upgraded to Neutral from Sell at UBS
DexCom (DXCM) upgraded to Buy from Neutral at Sterne Agee
Nike (NKE) upgraded to Outperform from Neutral at Macquarie
Palo Alto (PANW) upgraded to Outperform from Market Perform at JMP Securities
Premier (PINC) upgraded to Buy from Neutral at ISI Group
Prospect Capital (PSEC) upgraded to Buy from Neutral at Guggenheim
Twitter (TWTR) upgraded to Hold from Sell at Cantor
WESCO (WCC) upgraded to Buy from Neutral at UBS
Wright Medical (WMGI) upgraded to Outperform from Neutral at RW Baird
Yamana Gold (AUY) upgraded to Neutral from Underweight at HSBC


Bed Bath & Beyond (BBBY) downgraded to Neutral from Buy at BofA/Merrill
CF Industries (CF) downgraded to Equalweight from Overweight at Barclays
Cabot Oil & Gas (COG) downgraded to Hold from Buy at Stifel
Imperva (IMPV) downgraded to Perform from Outperform at Oppenheimer
Molson Coors (TAP) downgraded to Neutral from Buy at Nomura


Apple (AAPL) initiated with a Buy at Deutsche Bank
Crocs (CROX) initiated with a Buy at Buckingham
Deckers Outdoor (DECK) initiated with a Buy at Buckingham
EMC (EMC) initiated with a Buy at Deutsche Bank
HP (HPQ) initiated with a Buy at Deutsche Bank
IBM (IBM) initiated with a Hold at Deutsche Bank
NeoPhotonics (NPTN) coverage resumed with a Market Perform at Raymond James
NetApp (NTAP) initiated with a Hold at Deutsche Bank
Nutrisystem (NTRI) initiated with a Buy at B. Riley
Questar (STR) initiated with an Underperform at BofA/Merrill
S&T Bancorp (STBA) initiated with an Outperform at Raymond James
STB Systems Inc (STBI) initiated with an Outperform at Raymond James
Skechers (SKX) initiated with an Underperform at Buckingham
Steven Madden (SHOO) initiated with a Buy at Buckingham
UGI Corporation (UGI) initiated with a Buy at BofA/Merrill (WWWW) initiated with a Neutral at Buckingham


IDC said worldwide PC shipments totaled 73.4M units in Q1, down 4.4% y/y (MSFT, HPQ, LNVGY)
Gartner said worldwide PC shipments in Q1 fell 1.7% (MSFT, HPQ, LNVGY)
Costco reported March total company SSS up 5%
Imperva (IMPV) cut its Q1 profit and sales outlook, citing delays in receiving certain anticipated orders as a result of an extended sales cycle. Cybersecurity peers Fortinet
AngioDynamics (ANGO) gave a Q4 earnings outlook that beat estimates while guiding revenues for the upcoming quarter in-line with expectations
Pier 1 Imports (PIR) board authorized a new $200M stock repurchase program
Chevron (CVX) said Q1 earnings expected to be lower than Q4


Companies that beat consensus earnings expectations last night and today include:
iGATE (IGTE), AngioDynamics (ANGO), PriceSmart (PSMT), Joe's Jeans (JOEZ)

Companies that missed consensus earnings expectations include:
Sigma Designs (SIGM), Apogee Enterprises (APOG), NeoPhotonics (NPTN)

Companies that matched consensus earnings expectations include:
Pier 1 Imports (PIR), Bed Bath & Beyond (BBBY)


JPMorgan (JPM) CEO says 2013 was a year of 'pain,' WSJ reports
BlackBerry (BBRY) CEO says would consider sale of handset unit, Reuters reports
Apple (AAPL) departure of interface head Greg Christie, FT reports
Apple (AAPL) weighing 'dramatic' overhaul of iTunes store, Billboard says
General Motors (GM) requests NASA review in recalled vehicles, Detroit News says
Yahoo (YHOO) hires Bobbi Brown to be editor-in-chief of beauty site, Re/code reports
Facebook (FB) removing messaging from main app, TechCrunch says
Competition, overexpansion hurting Whole Foods (WFM) competitors (FWM, SFM, TFM), WSJ reports


Adamas Pharmaceuticals (ADMS) 3M share IPO priced at $16.00
Agios Pharmaceuticals (AGIO) files to sell $75M in common stock
Ally Financial (ALLY) 95M share IPO priced at $25.00
Aviv REIT (AVIV) 8M share Secondary priced at $24.10
Box Ships (TEU) files to sell common stocks and warrants
Hi-Crush Partners (HCLP) 4.25M share Secondary priced at $41.29
New Mountain Finance (NMFC) files to sell 3.5M shares of common stock
Stereotaxis (STXS) terminates $15M at-the-market equity offering with Cantor
Sysorex Global (SYRX) 3.333M share IPO priced at $6.00
TransAlta (TAC) announces $125M common stock offering

Futures Fail To Levitate Green Despite Atrocious Chinese And Japanese Econ Data

The main overnight event, which we commented on previously, was China's trade data which was a disaster. March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb).

And here comes the magic of spin: according to DB, "the market reaction has been muted perhaps because many have attributed today’s drop to distortions caused by last year’s over-invoicing issues.... the data quality issues from last year have caused a very high base for this year’s trade numbers." In the first quarter of last year, exports grew on average by 19% YoY, which was substantially higher than the growth rate in the adjacent months. This year, Q1 exports have shrunk by an average of 4.7%. It’s a similar story for imports, which averaged 9.5% growth during Q1 last year, significantly higher than months prior and after, and stronger than the average during Q1 this year of 2.9%. So it’s likely that there are some base-effects at play that partially explain the weakness in today’s numbers, even if Lunar New Year distortions have been removed.

In other words, everyone knew about last year's manipulated numbers, but nobody took them into consideration and now that the "reality" shocked everyone, it is time to goal seek the narrative, or, as it is better known in the US - "snow in the winter."

In yet other words, fabricated Chinese data should be ignored, but is made more credible because it compares to prior "really and truly" fabricated data. One can't make this up.

Elsewhere in Europe, initial upside by European stocks buoyed by dovish FOMC minutes - minute which said nothing that was unexpected and yet the "market" soared upon their release as if it was a revelation that Yellen was dovish (let's ignore the market surge after Yellen's two out of three ex-convicts can't get a job speech - in fact, every time it is revealed Yellen is an uberdove, the S&P should surge another 1%) was not sustained and stocks turned lower on no fundamental news, with good size block sale triggering stops in Eurostoxx 50 (-0.73%). Final pricing details on the Greek 5-year bond is due later today, with books over EUR 20bln.

Pricing on the Greek 5-year syndicated bond is due later today, with the final size of the bond boosted to EUR 3bln from EUR 2.5bln as order books exceed EUR 20bln (equating to a rough bid/cover ratio of over 6) as the final yield is set at 4.75% (well below the 5.3% finance ministry target and well above our "the world is a bunch of idiots managing other people's money" 3% target). Ireland sold EUR 1bln in 10y bonds, marking the third successful return to the bond market since the bailout. Also of note, this morning saw the release of lower than expected French CPI data, underpinning fears of potential deflation in the Eurozone.

Bulletin headline summary from RanSquawk and Bloomberg

  • Treasuries gain with JPY, bund and gilt yields fall as European stocks decline. Week’s auctions conclude with $13b 30Y bonds, yield 3.555% in WI after drawing 3.63% in March.
  • Yesteday benchmark yields at every tenor fell from session highs after FOMC minutes said some members expressed concern that that upward shift in fed funds projections might be misconstrued as suggesting a move to a less accommodative reaction function
  • China’s exports and imports unexpectedly fell in March as Premier Li Keqiang said the nation will roll out more policies to support growth while avoiding stronger stimulus
  • Greece is ending a four-year exile from international markets with a bond sale of at least EU3b, more than the government estimated; final yield 4.95%, coupon set at 4.75%
  • Draghi will probably take action within two months against the threat of deflation, economists said, with 2/3 of respondents in a Bloomberg survey predicted the ECB will ease policy by June
  • Just under half said he may implement multiple measures ranging from interest-rate cuts to asset purchases and long-term loans
  • The Bank of Japan is likely to predict that inflation will remain around 2% in fiscal 2016 in its next economic outlook report on April 30, Nikkei newspaper reports, without attribution
  • G-7 finance chiefs will discuss the crisis in Ukraine at talks in Washington as a standoff continued in the country’s eastern cities, where pro-Russian protesters faced off against police
  • Vladimir Putin is more likely to sign a 30-year deal to supply pipeline gas to China next month after more than a decade of false starts as Russia looks for markets outside Europe
  • Sovereign yields fall. Asian stocks gain, Shanghai +1.4%. European equity markets, U.S. stock futures decline. WTI crude, lower, gold and copper higher

US Event Calendar

  • 8:30am: Initial Jobless Claims, April 5, est. 320k; Continuing Claims, March 29, est. 2.835m (prior 2.836m)
  • 8:30am: Import Price Index m/m, March, est. 0.2% (prior 0.9%)
  • 2:00pm: Monthly Budget Statement, March, est. -$36b (year ago -$106.5b)
  • 7:00am: Bank of England seen holding bank rate at 0.5%
  • 11:30am: Fed’s Evans speaks in Washington along with Reserve Bank of India’s Rajan, other central bankers Supply * 11:00am: U.S. to announce plans for auctions of 3M/6M bills,
  • 11:00am POMO: Fed to purchase $2.75b-$3.5b notes in 2018 sector
  • 1:00pm: U.S. to sell $13b 30Y bonds in reopening

Asian Headlines

The Nikkei 225 pulled off the opening gains after poor Chinese Trade Balance (7.7bln vs. Exp. 1.80bln (Prev. -22.99bln) as a higher than expected surplus was countered by exports (-6.6% vs. Exp. 4.8%) and imports (-11.3% vs. Exp. 3.9%) falling well below expectations. As such, the Nikkei 225 steadily pared all of those gains throughout the session to close flat. Chinese equities shrugged off the trade data as sentiment benefited from reports that the Shanghai and Hong Kong exchanges are to be intrinsically linked, allowing capital to flow between the Shanghai Composite (+1.4%) and Hang Seng Index (+1.5%) with ease. Chinese stocks also benefited from the first net injection of liquidity for 9 weeks (injection of CNY 55bln vs. a drain of CNY 62bln last week). (RANsquawk)

US Headlines

Fed's Evans (non-voter, dove) sees at least 6 months between the end of QE and first rate rise, and sees first rate rise most likely in late 2015. (BBG/RTRS)

PIMCO total return funds cuts US government related holdings to 41% in March from 43% in February. (RTRS)


Stocks in Europe failed to sustain the initial upside buoyed by dovish FOMC meeting minutes and turned lower on no fundamental news, as the weakness in the Eurostoxx50 pulled the other indices lower (around 20k sold), which in turn flushed out stops. As a result, heading into the North American open, the more defensive health care sectors stands on top of leader board.


Dovish FOMC minutes inspired weakness (USD index -0.1%), saw USD/JPY trend lower overnight in Asia and in Europe this morning, in turn provided some degree of support for EUR/USD, which in spite of risk reversal in sentiment remained in the green.


Precious metal prices were supported by the dovish FOMC minutes release, with gold moving back above the 50DMA and spot silver moving above the 100DMA level.

In conclusion, here is Jim Reid's overnight recap

We start off today’s EMR looking at the Chinese trade report for March which was released overnight. There was a high level of anticipation leading up to today’s report given that it’s the first set of trade numbers following the Jan-Feb distortions caused by the timing of the Lunar New Year which fell on the first month of this year and the second month of last year. Today’s March numbers turned out to be well below market consensus with exports falling 6.6% YoY (vs +4.8% expected) and imports falling 11.3% YoY (vs +3.9% expected). The underperformance of imports caused the trade balance to spike to $7.7bn (vs -$23bn in Feb). The market reaction has been muted perhaps because many have attributed today’s drop to distortions caused by last year’s over-invoicing issues. Indeed, the data quality issues from last year have caused a very high base for this year’s trade numbers. In the first quarter of last year, exports grew on average by 19% YoY, which was substantially higher than the growth rate in the adjacent months. This year, Q1 exports have shrunk by an average of 4.7%. It’s a similar story for imports, which averaged 9.5% growth during Q1 last year, significantly higher than months prior and after, and stronger than the average during Q1 this year of 2.9%. So it’s likely that there are some base-effects at play that partially explain the weakness in today’s numbers, even if Lunar New Year distortions have been removed.

China’s Customs Department said today that the Q1 trade drop was partly due to 2013’s inflated data (Bloomberg) and it seems we may need to wait for another few months before the data distortions clear up. By geography, the worst major export market was Hong Kong which was a major source of overinvoicing activity last year. Exports to HK fell 43% yoy in March (-31% YTD) which was much worse than exports to the EU (+10%).

For the moment, the stronger sentiment from last night's FOMC minutes (discussed below) have partly compensated for the below-consensus Chinese trade numbers. Equities are mixed with China weaker offset by stronger price action in Japan (Nikkei +0.05%). The Australian dollar is up 0.2%, rallying strongly after a strong set of Australian employment numbers but giving up some of those gains after the Chinese data. Copper is down 0.4%. Sentiment has been supported by comments from Chinese Premier Li who pledged further economic reforms and tax breaks to support small-mid size companies. The Nikkei gapped higher at the open but gains have been pared back as USDJPY continues to fall, now below 102, driven by a weaker USD. In Indonesia, the latest results from parliamentary elections have resulted in some risk taken off the table after a 15% rally in Indonesian equities and 7% rally in the rupiah this year. Unofficial exit polls suggest that presidential frontrunner Joko Widodo’s PDIP party has only managed to secure 19.7% of the vote, likely leaving his party in search for coalition partners to form a government. Instead of a coalition focused largely around the pro-reform PDIP, the country faces the prospect of a fragmented multi-party government. The Jakarta Composite is down 3.1% today and the Rupiah is 0.6% weaker against the USD.

Yesterday session was largely dictated by the reaction to the FOMC minutes. Having gone through the minutes, and judging by the market reaction following its release, it now seems markets might have misunderstood Yellen’s post-FOMC press conference or at least over-interpreted the “dot plot” and “six months” comment. Following its release last night, the US treasury curve steepened driven almost exclusively by the front end (3-6bp lower) while 10yr yields were basically unchanged. The USD index dropped by 0.35% and EURUSD popped back above 1.385 which will likely be of some frustration to European policy makers. The S&P500 closed at the highs of +1.1% with a strong showing by tech stocks which finished 1.5% higher. EM had a somewhat mixed day, but the hour or so of LATAM trading post-minutes saw a strong rally in the Brazilian Real and Mexican Peso as markets sold down the US dollar.

Looking at the minutes in more detail, the key points that the market picked up on was the Fed’s discussion on the “dots” and what it meant in terms of how market participants would interpret the future path of rates. The minutes said that “A number of participants noted the overall upward shift since December in participants’ projections....with some expressing concern that this component of the (projections) could be misconstrued as  indicating a move by the Committee to a less accommodative reaction function”. Also, several participants noted “that the increase in the median projection overstated the shift in the projections”. The Committee seems to have resolved the discussion by agreeing on providing an explicit indication in the policy statement that the new forward guidance “did not imply a change in the Committee’s policy intentions, on the grounds that such an indication could help forestall misinterpretation of the new forward guidance”. Adding to the dovish sentiment, the minutes said that softer growth in Q1 was “likely only in part because of the temporary effects“ of the weather.

In terms of inflation, the staff forecast was unchanged from the previous meetings and a couple of participants expressed concern that inflation might not return to target in the next few years and questioned “whether the Committee was providing an appropriate degree of monetary accommodation”. The minutes also revealed that the Committee had actually met before the FOMC itself, via video conference on March 4th (some two
weeks before the actual FOMC on March 18-19th). The video conference was used to discuss possible changes in forward guidance but apparently no policy decisions were made at the time. In an interesting comment, the minutes revealed that staff have “lowered slightly the assumed pace of potential output growth in recent years and over the projection period” and that over the next few years “real GDP growth would exceed the growth rate of potential output”. We’re unsure what to make of this comment but perhaps there are some at the Fed who believe that the output gap in the US economy is lower than previously thought.

Away from the Fed headlines, there were some interesting snippets from yesterday’s bi-annual IMF Global Financial Stability report. The report warned of rising debt levels, and said that the “scaling back of certain extraordinary policy supports has not been accompanied by adequate preparations for a new environment of normalised, self-sustaining growth”. The IMF also said that “Undue delay (in removing easing policy) could lead to a further build-up of financial stability risks, and too rapid an exit could jeopardise the economic recovery and exacerbate still-elevated debt burdens in some segments of the economy”. Indeed, this “Bubble-Taper Tightrope” is something we argued that policy makers would face when we wrote our Credit Outlook for this year. The IMF report also urged China’s banking authorities to remove the implicit guarantee around shadow banking products, but to do so without triggering broad-based financial system stress.

In Japan, the Nikkei is reporting that Japan's Government Pension Investment Fund, the world’s largest pension fund, is considering investing in emerging market bonds and may also invest in low-rated, high-yield bonds and inflation-linked government securities. According to Reuters, this would be the first time the public fund has expanded its foreign bond investment beyond conventional bonds. The GPIF plans to choose asset managers for foreign bonds by the end of this fiscal year. This comes after a Welfare Ministry panel had earlier proposed that the GPIF diversify its portfolio by shifting away from its heavy focus on low-risk, low-return domestic bonds (Nikkei).

Turning to the day ahead, the focus in Europe will be on Greece’s return to the bond markets. The G20 finance ministers and central bank governors meet today in DC, timed to coincide with the IMF/World Bank meetings which start tomorrow. The G7 finance ministers will also convene today to discuss possibly ratcheting up sanctions against Russia (Reuters). The data docket will be pretty light with industrial production updates from various Euroarea countries and US jobless claims. The BoE wraps up its April policy meeting today. Oh and we have the Masters from Augusta! A lovely way to wrap up the day!