Bond Bubble Game To Collapse

Bond Bubble Will Explode Violently

"There is also a lack of liquidity in bond markets because central banks have removed all the supply. Investors don't want to buy new debt with negligible yields, but also don't want to sell if central banks are providing a perpetual bid. Therefore, there is no trading outside of institutions front running the central banks’ purchases—again, as long as there is no inflation". - Excerpt

Central banks are incapable of saving economies or creating growth. The only thing a central bank can do is create inflation. These market manipulators set forth on a journey seven years ago to save the world by engaging in massive monetary manipulation, euphemistically called Quantitative Easing (QE), and a Zero interest rate policy known as (ZIRP).

As I could have told them before they started, all this easy money will fail to create viable growth. The economy, held back by massive debt levels, initially clocked in at 0.2% for the first quarter. This number is set to be revised down to negative territory due to a huge increase in the trade deficit during March. And the second half isn't setting up to be much better either.

Wackee Leaks 

Top Secret Central Bank Video

HOW to Create Neoclassical Money Supply?

But the Fed was successful in re-inflating the housing and equity bubbles and also creating another new massive bubble in the bond market. Read More.

INVESTORS' INSIGHTS  - "Today's Edge" 

Yesterday a skeptical reader didn't think that a conspiracy existed. Not all conspiracies are deliberate. Some occur by either accident or sheer stupidity. This one was sheer stupidity.

How do we know? First, except for real estate there has been little capital formation in the real economy creating  high value jobs to replace those shipped to China. Two, who in there right minds would set up such a mathematical financial trap where asset values are devastated mathematically with the slightest move in rates.Three, no real new innovation outside of social media for pre-teens - and fourthly, major raw material resource shortages, including fossil fuels are on the near-term  horizon. 

Lastly, there are national  real estate and financial bubbles around the world that are analogous to Japan in the 80's and 2007. Go figure? 

In short, this is now a key component in the much larger geopolitical game and that sets the stage for global conflict when the raw material shortages articulate themselves fully.

So much for neoclassical economics!

International Offices
May 21, 2015 

Beware Liquidity Drying Up Global Bond Markets

Liquidity Mirage Causes Volatility

 in government bonds

At the moment, volatility in the government bond market continues to be a huge theme in the market and one that investors need to consider and address.  Whatever the initial causes of the adjustment in relative and absolute yield curves and there are plenty of potential culprits – Federal Reserve rate expectations, European Central Bank quantitative easing, inflation forecasts etc. – the subsequent severe volatility has been without doubt exacerbated by the lack of liquidity.

What is particularly worrying is that this lack of liquidity is occurring in global government bond markets, which are deemed to be the most-liquid fixed-income sectors.  To highlight this issue, Bloomberg reported that on ICAP's BrokerTec platform's (an electronic trading system for FI markets) April volumes fell 14 per cent from a year ago and were the lowest in six years. Read More.

INVESTORS' INSIGHTS  - "Today's Edge" 

Sooner or later the bond market will run out of bigger fools as inflation is much higher than reported by governments while investors are losing principal with negative real returns. In essence we are seeing a global debasement of all currencies under present policies.

When the bonds crash they will bring down the markets too. Time has come to unload those highflyers that have no earning because they can drop like a stone from dollars to pennies, all in the blink of young girl's eyes.

International Offices
May 19, 2015