Turkey tries the baffle with BS approach....
Following Failed Turkish Central Bank Intervention, Verbal Diarrhea Follows
Submitted by Tyler Durden on 01/30/2014 07:24 -0500
Yesterday's epic failure of central bank intervention when both Turkey and South Africa hiked rates only to see their currency initially bounce then collapse, is long forgotten, and early today, the USDTRY once again traded to the rather unstable level of 2.30 and threatened with yet another rout, before verbal intervention out of Russia managed to soothe nerves on edge around the EM world. What followed out of Turkey, however, was an epic verbal diarrhea from both the government and the central bank, which firmly proves the nation on the Bosphorus truly has no idea what it is doing. Here is the evidence.
First, here is the Finance Minister desperate to reprise Rahm Emanuel.
- SIMSEK SAYS TURKEY 'WON'T WASTE THIS CRISIS'
- WE'LL TURN THIS CRISIS INTO AN OPPORTUNITY,' SIMSEK SAYS
Next, some deep thoughts on capital flows
- SIMSEK: TURKEY SAW INFLOWS, NOT OUTFLOWS IN LATEST PERIOD
- SIMSEK: I BELIEVE WE WON'T SEE OUTFLOWS THIS YEAR
- SIMSEK: BUT WE ALSO HAVE TO ATTRACT CAPITAL
Next - a spirited defense of government policies
- SIMSEK SAYS ERDOGAN IS MISUNDERSTOOD ON INTEREST RATES LOBBY
- SIMSEK SAYS TURKEY'S INTEREST LOBBY TALK NOT ANTI-INVESTOR
- SIMSEK SAYS TURKEY GOVT PLANNING MEASURES ON CORRUPTION
A glimpse of Plan B thru Z, promising there will be no capital controls. Translation: by the time all is said and done, there will be capital controls.
- TURKEY WON'T RESTRICT CAPITAL MOVEMENTS, FINANCE MINISTER SAYS
- TOO EARLY TO TALK ABOUT USE OF FISCAL POLICY FOR SHOCKS: SIMSEK
- TURKEY HAS ROOM ON FISCAL POLICY TO DEAL WITH SHOCKS: SIMSEK
- IMPORTANT WHETHER TURKEY RATE INCREASE TO LAST OR NOT: SIMSEK
Finally, here is the central bank itself confirming nobody in Turkey has any idea what is going on
- TURKEY BANK: TIGHT POLICY SHOULD DETER INFLATION EST WORSENING
- TURKEY CENBANK SAYS INFLATION SEEN REACHING 5% TARGET MID-2015
- TURKEY BANK SAYS CURRENT STANCE ENOUGH TO ANCHOR INFLATION ESTS
- TURKEY BANK SAYS WON'T TOLERATE PRICE STABILITY DETERIORATION
- TURKEY CENBANK: FX MOVES RAISED ABOVE-TARGET INFLATION RISK
- TURKEY FLOATING RATE REGIME NOT BEING DEBATED, SIMSEK SAYS
Submitted by Tyler Durden on 01/30/2014 - 07:10
And so following yet another Fed taper, coupled with another disappointing manufacturing data point out of China, emerging markets did their thing first thing this morning and all the most unstable EM currency pairs - the TRY, the RUB, the ZAR and the HUF - all plunged promptly in the process pushing down the USDJPY which as become a natural carry offset to EM troubles, only to rebound promptly. Specifically, USDTRY blew out 400 pips to 2.3010 highs after which it bounced, and has now stabilized around 2.27, well above the Turkish central bank intervention level, USDZAR is back down to 11.2120 after hitting five-year highs of 11.3850, the Ruble also plunged after which it jumped on speculation of Russian central bank intervention, while futures are tracking even the tiniest moves by USDJPY and pushing the Emini which is trading in a liquidity vaccum by a quarter point for ever 2 or pips. And with all news overnight shifting from bad to worse (keep an eye on declining German inflation now) it goes without saying, that EM central banks around the world now are desperately trying to keep their currencies under control: which is why the market's jitteryness is only set to increase from here on out.
( It's hard to gauge how markets and traders will interpret Central Bank moves on the day of the move - you need a few days for things to percolate... )
FOMC Ignores EM Crisis, Tapers Another $10 Billion - December Statement Redline
Submitted by Tyler Durden on 01/29/2014 14:01 -0500
Consensus that the Fed would extend its $10bn taper from December with a further $10 bn taper today (reducing the monthly flow to a 'mere' $65 billion per month - $30bn MBS, $35bn TSY) was spot on. We suspect the view,despite the clear interconnectedness of markets (and flows), of the FOMC is that "it's not our problem, mate" when it comes to EM turmoil.
- *FED TAPERS BOND BUYING TO $65 BLN MONTHLY PACE FROM $75 BLN
- *FED SAYS LABOR MARKET `MIXED,' `SHOWED FURTHER IMPROVEMENT'
- *FED REITERATES LOW RATES UNTIL JOBLESS RATE `WELL PAST' 6.5%
- *FED REPEATS RISKS TO OUTLOOK HAVE BECOME `MORE NEARLY BALANCED'
- *FED SAYS UNEMPLOYMENT HAS DECLINED `BUT REMAINS ELEVATED'
Of course, "communication" was heavy with forward guidance on lower for longer stressed. We'll see if the market buys the dichotomy of hawkish real tapering and dovish promises...remember "tapering is not tightening."
Pre-FOMC: S&P Futs 1775, Gold $1267, 10Y 2.71%, 2Y 35.5bps, USDJPY 102, EM FX 85.67, WTI $97.35, IG 72bps, HY $106.35
Perhaps this chart from Saxo Capital Markets ( @saxomarkets ) sums up the world best for now...
Full redline below...
Some views on the day......
Fed To Emerging Markets: "Hasta La Vista, Baby"
Submitted by Tyler Durden on 01/29/2014 15:03 -0500
Just out from Citi's Steven Englander
Fed leaves EM to twist in windFrom the viewpoint of domestic US economic conditions the Statement is completely anodyne. From the point of view of EM, the Fed has just said “hasta la vista, baby”.The comment on US growth was a not surprising upgrade in the growth assessment – economic activity ‘picked up’ rather than ‘is expanding at a moderate pace’, but very little else changed other than the expected USD10bn additional tapering. There were no dissents and no changes in the forward guidance language. Since the announcement MXN and AUD are down about 0.4%, so there is modest disappointment in high-beta currencies. The S&P is down about 10points, taking down US Treasury yields which initially spiked but have since dropped.On these asset market conditions look to JPY , CHF and EUR to do well, commodity currencies and EM to do poorly.
Hilsenrath's 729 Word FOMC Post-Mortem (In Under 2 Minutes)
Submitted by Tyler Durden on 01/29/2014 14:14 -0500
It took Hilsenrath 2 minutes after the FOMC announcement to release the following 729 word analysis of what Bernanke just did. The punchline: "Overall, the Fed changed very little in its statement from the previous month.Neither a disappointing December jobs report nor recent turmoil in emerging markets was enough to diminish their positive outlook for the U.S. economy. The Fed reiterated their view that "risks to the outlook for the economy and the labor market as having become more balanced," language they added to the statement for the first time in December.... The Fed repeated its message that they will likely keep rates at
that low level "well past" the unemployment rate reaching 6.5%."
that low level "well past" the unemployment rate reaching 6.5%."
Fed to Further Cut Bond-Buying ProgramThe Federal Reserve said it would further pare its signature bond-buying program next month, a move that solidifies the central bank's strategy for winding down the program in small steps at each of its meetings as long as the economy continues to improve.The Fed's policy-making committee said in a statement Wednesday that it would trim its bond purchases to $65 billion per month in February, from a monthly pace of $75 billion in January.The decision to pull back on the bond program was unanimous, marking the first time there wasn't a dissent at a policy meeting since June 2011....The central bank announced it would start scaling back the program following its Dec. 17-18 meeting, and made the first $10 billion cut in January. At the time, Fed Chairman Ben Bernanke strongly suggested the Fed's preference was to whittle down its bond buying by $10 billion at each of its policy meetings this year, wrapping up the program altogether near the end of the year....Overall, the Fed changed very little in its statement from the previous month. Neither a disappointing December jobs report nor recent turmoil in emerging markets was enough to diminish their positive outlook for the U.S. economy. The Fed reiterated their view that "risks to the outlook for the economy and the labor market as having become more balanced," language they added to the statement for the first time in December.All ten members of the Fed's policy-making committee supported the decision to continue scaling back the bond-buying program.The Fed also voted to keep short-term interest rates pinned near zero, where they've been since late 2008. The Fed repeated its message that they will likely keep rates at that low level "well past" the unemployment rate reaching 6.5%. The Fed earlier set that as the threshold at which it will start considering raising rates, as long as inflation remains in check.The Fed also extended an experimental program which it could someday use to manage short-term interest rates. Known as a "reverse repo" facility, the program uses the Fed's portfolio of bonds as collateral for loans to market participants and uses the rate on those loans to influence market rates. The experiment was set to expire Wednesday, but the Fed extended it for a year until Jan. 2015. They increased caps on the size of trades the Fed can make to $5 billion per counterparty from $3 billion.