http://hat4uk.wordpress.com/2013/05/15/global-looting-irish-banking-system-about-to-go-bang/

GLOBAL LOOTING: Irish banking system ‘about to go bang’

Behind the scenes at the Dublin FinMin bail-in bunfight

“Together – with our debt and your money – we can work this thing out”

Renowned infamist Reggie Middleton has been banging on about the basket case that is the Irish banking system for some time now. I have to confess that I had my eye taken off this ball by a continuing fascination with Plod’s blind spot about systemic child buggery; but in its own cataclysmic way, bank depositor buggery is an equally serious issue. A valued eye in Dublin sent me some data on this yesterday (big hat tip for that, Christopher) and afterwards I contacted two further people there – one a hack, the other a banker of sorts. Their feedback was intriguing.

In case you didn’t catch onto it yet, the Truthspeak for stealing from depositors has moved on from ‘Open bank reconciliation’ to the preferred mendacity of ‘Positive Depositor Preference’. So if you think your Sovereign State is about to rip you off for a hundred grand, watch out for somebody putting on the orange glove, because then you know when you’ve been Cyprused. (With apologies to the old Tango campaign)

The EU FinMins were fortuitously meeting in Dublin over the last two days, which appears to have served two purposes: making the ship look unsinkable, and facilitating frantic negotiation away from the Big Table. In recent weeks, Troika visits have been downplayed, and Ireland has been referred to as ‘nearing the end of its bailout’. ‘But the simple truth,’ wrote the Irish Times three days ago, ‘is that Irish banks need more capital’. Politely, the IT reiterated a Slog chestnut of long-standing: without capital, there can be no growth. The problem, if I understand my sources correctly, isn’t that the Irish banks need more capital to help economic growth: they need it, right now, to avoid collapse.

German Bundestag leaks from anti-euro MPs suggest that a Troika team has already stress-tested Ireland’s Banks, and sent an explanatory note to Jeroen René Victor Anton Dijsselbloem along the lines of “Every man for himself”. Or more accurately, “Everyone else’s money for us”. So to employ a Jeremy Warnerism, “If you have money in an Irish bank, get it TF out now”.

I’m reliably informed that the Irish presidency of the European Council tabled a blatant depositor ‘preference’ scheme six days before last weekend’s G7 meeting near London. It then flew from G7 to FinMin, onto a menu under the table, and got itself debated via some suitably restrained yelling away from the table. Later, back at the table, the scheme was approved by “almost all” of the FinMins present, so clearly the idea to crash your cash isn’t off the table, it’s just not being released to the media, who were anyway busy getting pie-eyed at the adjacent table.

Around mid-afternoon yesterday, Dijsselbloem had this to say: “I’m very reluctant to allow for a lot of flexibility for the euro-zone countries. The pressure will be enormous from financial markets, from your parliaments, not to go too hard on the bail-in, to take more risks on the public account once again.” Putting those remarks into words, what Jeroen means to say there is that we have two ways of doing this guys: keep printing money, or just cut out the bureaucracy involved and steal it off the citizenry, like we did in Cyprus. But his intention in putting all the right words in the wrong order was to suggest that everyone who’s been reading Reggie Middleton’s column should calm down.

This is because the Dutchman knows via Mario and Wolfie that money is flying out of the eurozone so quickly now, teams are working 24/7 on bank carpets to clean off the scorch-marks. So he has to say he’s reluctant. He has to suggest that – as he did later in the same press session – there will only be “very restrictedexemptions to proposed European Union rules on how to assign losses when banks fail.” But either because he’s a mealy-mouthed sh*thead, or just muddled as a person, Dissisgoinboom left the impression that stealing would be the exception, not the rule. In fact, the rule as approved by most of the Funny-money Finmins yesterday was, um, stealing. My money’s on Jeroen being an MMS, but you must make your own minds up on that one.

Despite the playful tone of this piece, I should like to ask for something I think to be fairly reasonable from Britain’s mainstream media:

↓

WAKE UP

I feel a little better now.

http://www.zerohedge.com/news/2013-05-15/france-double-dips-european-recession-now-longest-record

France Double-Dips As European Recession Is Now Longest On Record

Submitted by Tyler Durden on 05/15/2013 07:42 -0400

Central Banks

Double Dip

France

Germany

Gross Domestic Product

Recession

Confirming that in a world in which either commercial or central banks have to be constantly be churning out debt, and in a world in which Europe is doing neither (with European commercial loan growth posting sequential declines across the board, and the ECB's balance sheet still declining although likely not for long), "growth" as defined by conventional standards, is impossible, we got today's European Q1 GDP data. Not only was it bad, but it was even worse than most had expected.

And while Germany may have escaped a technical recession after its economy grew by the absolute minimum possible 0.1 percent in the first quarter (does it too also include intangibles in its GDP calculation one wonders) following a drop in Q4, it was France that officially double dipped into its second recession in four years with a 0.2 percent contraction and one year into Hollande's term. As the Bloomberg Brief chart below shows, Germany and France account for 49 percent of euro-area output. Overall, the euro-area economy contracted by 0.2 percent in the first quarter. The region’s economy has been shrinking since October 2011, the longest recession since the start of monetary union.

Meanwhile, France welcomes the double dip:

and.....

http://www.zerohedge.com/news/2013-05-15/futures-rise-european-gdp-declines-worst-annual-pace-2009

Futures Rise As European GDP Declines At Worst Annual Pace Since 2009

Submitted by Tyler Durden on 05/15/2013 06:51 -0400

So much for Europe's "recovery." In a quarter when the whisper was that some upside surprise would come out of Europe, the biggest overnight data releases, European standalone and consolidated GDPs were yet another flop, missing across the board from Germany (+0.1%, Exp. 0.3%), to France (-0.2%, Exp. 0.1%), to Italy (-0.5%, Exp. -0.4%), and to the entire Eurozone (-0.2%, Exp. 0.1%), As SocGen recapped, the first estimate of eurozone Q1 GDP comes in at -0.2% qoq, below consensus of a 0.1% drop. The economy shrank by 1.0% yoy, the worst rate since Dec-09. The decline of 0.5% qoq in Italy means that the economy has been in recession continuously since Q4-11. A 0.2% qoq drop in France means the economy has ‘double-dipped’, posting a second back-to-back drop in GDP since Q4-08. The increase of 0.1% qoq in Germany was disappointing and shows the economy is not in a position to support demand in the weaker member states (table below shows %q/q changes).

And here is why the EUR has been declining progressively overnight: SocGen's conclusion is the same as that of all sellside desks and policy makers: "Annual growth rate is not improving, time for the ECB to stop its balance sheet from shrinking." Just as expected: after all very soon the BOJ effect will be nullified, and the BOE's launch of QE is to an extent priced in, which means only the ECB is the wildcard. And the worse the European economy gets, the more likely it will be the next entrant in the global outright unsterilized monetization race.

The data should have no immediate implications for the ECB after the refi rate cut to 0.50% earlier this month. However, the data will continue to fuel the debate over whether the central bank should cut the deposit rate into negative territory and speed up measures to restore the flow of credit (ABS purchases under consideration), and stop its balance sheet from contracting (see chart 2). In annual terms, the eurozone economy has been in decline for five consecutive quarters. The only consolation is that, overall, the quarterly rate of contraction is lessening vs the end of 2012. The timing of return to positive growth remains uncertain.

Sure enough, this explains why futures across the Atlantic are once again looking up and why the US stock market will have yet another record high close.

On the US docket today, meaningless as they may be in a world in which only central bank balance sheets matter, we have Empire Manufacturing industrial production and and update on Producer Prices.

A summary bulletin of the key overnight highlights from Bloomberg:

Treasuries steady, holding near highest levels since March 25; EUR/USD falls to lowest in over a month as euro-area economy contracted 0.2% in 1Q, more than economists forecast.
Germany expanded 0.1%, less than forecast; France slipped into a recession and Italy’s contraction exceeded estimates
BoE raises 2Q growth forecast to 0.5% from 0.3% in 1Q; Governor Mervyn King says U.K. recovery is now “in sight”; says while negative rates are an “option on the table,” there are “good reasons” not to implement
U.K. unemployment rose in the 1Q and the number of people in work fell as the pressure on wages increased, adding to signs that the labor market is slowing
Nikkei closed above 15,000 for the first time since 2007 after JPY touched a 4-1/2-year low against the dollar
BoJ’s stimulus is showing signs of success, even as the yen weakness it fueled is set to reverse and a stock rally risks forming an asset bubble, according to former Ministry of Finance official Eisuke Sakakibara
Chinese Premier Li Keqiang signaled policy makers are reluctant to use stimulus to counter a slowdown in the world’s second-largest economy because the risks outweigh the benefits
The Bank of France wants to help banks package loans to businesses into tradable securities with the creation of special-purpose vehicles, in what could become a template for the euro area
Norway’s $740b sovereign wealth fund, the world’s biggest, said efforts by central banks and governments to manipulate exchange rates through excessive stimulus aren’t triggering a shift in its investment strategy
HSBC Holdings Plc will eliminate as many as 14,000 more jobs as CEO Stuart Gulliver set out plans to cut an additional $3b of costs as he tries to revive profitability
The widening inquiries into the IRS’s scrutiny of small-government groups is focusing more on agency executives who didn’t inform Congress earlier
Several veterans of the Obama White House and the Clinton administration say Obama and his team are ill- equipped to quickly contain political damage from probes into the handling of the Benghazi attack, the IRS targeting of anti-tax nonprofits and the Justice Department’s subpoena of telephone records of AP reporters and editors
Sovereign yields mostly higher; Greece 10Y yields tumble 88bps. Asian stocks gain, Shanghai +0.4%. European stocks and U.S. stock-index futures higher; WTI crude falls for fifth day; gold and copper lower

SocGen's recaps the main macro events:

AUD/USD has lost 4.6% so far this month, but the correction may not be over once the short-term consolidation has taken place. There are a number of precedents for this, going back to 2011 when a test of 0.9300 did not end there. Spot has extended its decline from that level by an average of around 3% on four occasions sinceOct-10, the maximum deviation being 5.5% to a 0.9388 low in Sep-11. Buying now risks catching a falling knife, especially with the vibes from Shanghai not giving a great sense of comfort these days. Moody's report yesterday on China's shadow banking system warned of asset bubbles and risks to financial stability. Separately, an article in the China Securities Journal yesterday pointed to the dilemma facing the PBoC: lower interest rates to curb capital inflows, or tighten monetary policy to keep the lid on the money supply? Going against the grain of the concerted global central bank easing, and with the Fed mapping an exit from QE3, China could test equity markets' effortless liquidity-fuelled push to new highs. China is a key destination for Australian exports, but for now AUD/USD is in the process of catching up with tighter AU/US 2y swaps. As our chart illustrates, the re-alignment has nearly run its course, but as there have been undershoots in the past, another one cannot be ruled out. The up-tick in AUD/USD vols (3mth to 9.40) comes off a low base and could have further to go if we compare it with the price action of May 2012.

The focus this morning will be on the first estimate of eurozone Q1 GDP (SG call: -0.1% qoq, but with downside risk after weak French and German data) and the BoE Inflation Report. Data published earlier showed the French economy contracted by 0.2% qoq (vs -0.1% forecast) and Germany expanded by only 0.1% (vs 0.3% forecast). The data should have no immediate implications for ECB policy so soon after the refi rate cut to 0.50%, but it will add to the debate on negative deposit rate and ABS purchases. Italian numbers are due shortly. The BoE IR has been a frequent market mover for GBP in the past and could cause ripples again today knowing that this will be governor King's last before he steps down in July. He has not sidestepped occasions to talk down GBP in the past and could do so again before he departs, but how can that be reconciled with a less downbeat tone on the economy?

The complete overnight recap from DB's Jim Reid

I'm sure markets also used to be simpler than they are at the moment. Will the recent sharp bond sell-off stabilise soon or turn into something a little more worrying? Yesterday saw 10yr JGB yields rise for the sixth consecutive day to 0.86% which is a level that we have only traded above for brief periods over the last twelve months. The magnitude of the recent upward move has been significant. Indeed, over the last six sessions, yields have moved upwards by 30bp which is the largest move we’ve seen in such a short period since at least December 2006. The last time we saw a six-day selloff streak was in July 2010, and back then the back up in yields was just 10bp. At 0.86%, the 10-yr yield is now close to double the lows of 0.44% seen in the immediate aftermath of the BoJ’s unprecedented announcements in early April.

Outside of a general global bond sell-off, it seems that inflation expectations have contributed to the move in JGBs and allowed it to under-perform other markets. The Japanese 5yr breakeven rate (currently 1.86%) is now more than 50bp higher since the BoJ’s announcements in April and +130bp since the mid-2012 lows. The moves have also added steepening pressure on curves with the 2yr-30yr Japanese curve steepening by 50bp since April 4th. The selloff was also evident in other bond markets including USTs where 10yr yields added 5.5bp yesterday to move back into the low end of the 1.95% to 2.05% trading range that held for much of Q1. In Europe, UK, French and German yields were a touch wider.

At some point one has to wonder when higher yields will begin to concern the Japanese authorities. Overnight, Prime Minister Abe told a parliamentary session that the government was closely watching movements in the bond market to ensure that it could digest Japanese government bonds in a stable manner (Reuters). He added that he was confident that the BoJ would “respond appropriately” to market movements while keeping regular dialogue with market players. The headline helped JGBs pare overnight losses, with yields now broadly unchanged as we type. Abe’s comments come after Japan’s economy minister Amari said yesterday that "Spikes in Japanese government bond yields would affect interest payments, which would impact fiscal reconstruction’. Thus far, the movement in JGBs doesn’t seem to be affecting sentiment in equities with the Nikkei adding another 2% overnight to take the index above 15,000 for the first time since early 2008. A number of outsized moves in notable corporates including Isuzu Motors (+20%) and Sony (+11%) is helping domestic risk sentiment. The USDJPY is weaker at 102.2 as we type.

Elsewhere in Asia, the ASX200 is trading 0.7% lower, and the AUDUSD fell 0.3% from the overnight highs on comments from Chinese Premier Li Keqiang. These were made on Monday at the State Council but were posted on their website today. Mr Li said that the Chinese economy faces downward pressure but warned that there is little room for stimulus or official investment. Li added that the economic situation remains "complicated" and said market forces will be needed to support growth. Chinese-related risk assets largely shrugged off the headlines though with copper (+0.1%) and the Hang Seng (+0.5%) firmer in overnight trading.

Returning to yesterday’s markets, credit continued its recent run of underperformance against equities. In the past week, the European iTraxx and CDX IG indices have widened 5bp and 4bp respectively. During the same time period, the Eurostoxx and S&P500 indices have added 11pts and 18pts respectively. Strength in US equities yesterday was broadbased with all ten industry sectors closing higher, led by financials and oil and gas stocks. The USD index added 0.4%, with the dollar’s strength evident against major currencies for the fourth straight session. It was a quiet day in terms of data yesterday, with a disappointing German ZEW survey (36.4 vs 40 expected) setting a weaker tone early in the European session. In the US, the NFIB small business optimism index printed at its highest level (92.1 vs 90.3 expected) since October 2012.

In other news, the European debate continued over the details of a Euroarea banking union and bank resolution. The ECB’s Asmussen stated that progress needed to be made on banking union negotiations and a framework on the distribution of losses are needed in the event of future bank failures. He reaffirmed that deposits of up to EUR100k must be protected from losses in the event of bank failure. Asmussen called for creating a central agency and an industry-funded common backstop for handling failing banks by "the summer of next year," when the ECB takes up new supervisory duties. Those views were seemingly in conflict with German FM Schaeuble, who has said the next step should be the coordination of national schemes to wind down problem banks, rather than a system with shared euro zone risk.

Today sees the release of advance GDP estimates for the euroarea as well as individual countries such as Germany, France, Italy and the Netherlands. Expectations are for a upward tick in GDP growth across the board. In the UK, the Bank of England’s quarterly inflation report and jobless data are scheduled. Across the Atlantic, a number of important updates including Empire Manufacturing industrial production and producer prices could drive sentiment during the US session.

http://www.zerohedge.com/news/2013-05-14/bonds-suffer-worst-4-days-10-years-nikkei-tops-15000-first-time-jan-2008JGBs Suffer Worst 4 Days In 10 Years As Nikkei Tops 15,000 First Time Since Jan 2008

JGBs Suffer Worst 4 Days In 10 Years As Nikkei Tops 15,000 First Time Since Jan 2008

Submitted by Tyler Durden on 05/14/2013 20:39 -0400

The Nikkei 225 just passed 15,000 for the first time since January 2008 no up over 77% from its November 2012 lows. Even "Mr Yen" is worried...

*SAKAKIBARA SAYS MOVEMENT OF EQUITY PRICES `SOMEWHAT BUBBLY'

But the real story is in bond land. Twice last night Japanese bond futures were saved miraculously from a third day in a row and at the open this evening JGB futures are looking set for another test of the limit down (though being saved for now) - as 10Y yields spike above 90bps (+5.5bps on the day), the highest in 13 months; and 5Y yields jump another 5bps to 45bps - the highest in 22 months. The last 4 days in 5Y JGBs has been the worst in 5 years (since June 2008) and 10Y JGB's worst 4-days in 10 years (since August 2003). USDJPY is holding below 102.00 as it seems for now the JGB weakness is soaking up the inflation threat (as we discussed here). Amid all of this turmoil,JGB implied volatility is collapsing to 4 month lows - which smells a lot like hedges being lifted along with underlying risk unwinds.

No Bubbles here...

Remember, nothing goes up forever (and equities are NOT a good inflation hedge away from the normal)...

What us worry? The cost of energy for the Japanese is bumping up against economy-limiting levels once again as they crush the JPY...

JGB Futures have not been happy but are being 'saved' from another halt for now... even as the cash underlying is ugly

This is what is going on in JGBs... JGBs were able to rally since smart money was hedging significantly (and not selling) but once the initial clusterfuck exploded after the BoJ meeting (and protection costs soared), it seems clear that JGBs just became far too expensive to hold given their risk and so protection was unwound and positions were reduced... which is why we are now seeing JGB yields jumping...

5Y JGB biggest 4-day loss in 5 years

10Y JGB biggest 4-day loss in 10 years

and for all those guffawing at the fact that rates are still so low... remember the surging cost of debt that will impact the Japanese economy each time they roll the quadrillion Yen debt load...

Charts: Bloomberg

Catharsis Ours

Wednesday, May 15, 2013