Monday, September 23, 2013

sept 24/Two Fed governors state we want no taper/another two state that they do want it/Gold and silver hold their own today.

Good evening Ladies and Gentlemen:

Gold closed down $5.60 cents to $1326.90. (comex closing time ).  Silver was down $ 7 cents to $21.81 

 In the access market today at 5:15 pm tonight here are the final  prices: 

gold: $1322.30
silver:  $21.64

At the Comex, the open interest in silver rose by another 663  contracts to 112,518.

The open interest on the entire gold comex contracts fell rose  by  3454 contracts to 377,524 as many flee the crooked Comex casino.    

Tonight, the Comex registered or dealer inventory of gold rises slightly tonight. It is now well below the 1 million oz mark, and also is well below the 700,000 level recording at  672,042. oz or 20.90 tonnes . With no gold entering the dealer side it seems almost impossible for the bankers to settle upon longs once the December contract hits. The total of all gold at the comex (dealer and customer)  tonight rests just above the 7 million oz barrier resting at 7.033 million oz or 218.90 tonnes. 

JPMorgan's customer inventory remains constant at 246,327.488  oz or 7.66 tonnes.  It's dealer inventory remains constant at 214,144.712 oz or 6.6607 tonnes. 

The total of the 3 major gold bullion dealers( Scotia , HSBC and JPMorgan)  in its Comex  dealer account again remains constant in gold inventory tonight and its resting inventory is  16.686 tonnes of gold. Brinks continues to record a low of only 3.76 tonnes in its dealer account.

Today,  GOFO numbers are in the positive for all months

Here are today's readings with Friday's comparison:  GOFO slightly greater in positivity .

i) One Month:  .07000   vs  Friday: .06000
ii Two Months:  08500.  vs Friday:  07500
iii) Three Months:  .09667 vs Friday:  09167
iv) Six months:  .1200  vs Friday:   .11667

We have great commentaries tonight from Bill Holter, Turd Ferguson, and a discussion of gold with Eric King and John Embry.

Finally we end up with a Chris Martenson and Jim Richards discussion of the end game where gold will be central to the resetting of the global financial scene.

We will provide these and other stories but first...................

Let us now head over to the comex and assess trading over there today.
Here are the details:

The total gold comex open interest fell today by 3454 contracts from  380,978 down to 377,524 with the fall in price of gold  on Friday. We are now in the non active delivery month of September and here the OI fell by 68 contracts to 147. We had 68 delivery notices filed on Friday so we neither  gained nor lost any gold ounces standing for the  September contract month. The next active delivery month is October and here the OI fell  by only 1348 contracts down to 17,493. We are 5 days away from first day notice for the October contract month, falling on Sept 28/2013 (this coming Friday). The biggest of all delivery months is the December contract month.   The December OI fell by 3237 contracts from 222,721 down to 219,484. The estimated volume today was on the weakish side  at 140,658 contracts. The confirmed volume on Friday was  strong at 206,398. 

The total silver Comex OI fell   today by 663 contracts with silver's fall in price on Friday.  The total OI now rests tonight at 112,518 contracts. It seems that the bankers are desperately trying to cover their paper shorts as they raid incessantly. We are now at extreme lows in OI with respect to silver and I believe we can assume that they are all in strong hands as the raid accomplished nothing as no additional silver leaves fell from the raid orchestrated by the crooks. We are now in the big delivery month of   September and here the OI fell by 47 contracts down to 138.  We had 42 delivery notices filed on Friday so in essence we lost 5 contracts or 25,000 oz of silver will not stand for delivery this month. The big December contract saw its OI fall 740 contracts down to 76,374. The estimated volume today was good coming in at 42,058 contracts.  The confirmed volume Friday was very good at 63,594.

Comex gold/September contract month

Sept 24.2013   standings for September contract month

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
5,353.92 oz (HSBC,Scotia)
No of oz served (contracts) today
 1 ( 100  oz)
No of oz to be served (notices)
83 (8300)
Total monthly oz gold served (contracts) so far this month
219  (21,900)
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We have  tiny activity in the Comex gold vaults today.

The dealer had  0 deposits  and 0 dealer withdrawals today

We had 2 customer deposits today.

i) Into HSBC:  790.62 oz
ii) Into Scotia:  4563.30 oz

total customer deposits: 5,353.92 oz

 we had 1 customer withdrawals

i) out of Brinks:  385.84 oz

 Total Customer withdrawals:  385.84    oz

Today we had 0 adjustments.

Thus tonight   with respect  to JPMorgan gold inventory, here is JPMorgan's Monday night inventory :

JPM dealer inventory  remains constant tonight at: 214,144.712 oz or 6.66 tonnes

JPM customer inventory remains constant  tonight to: 246,329.488 oz  or 7.66 tonnes

we should shortly see other inventory leave JPMorgan customer account as they settle their issuance.

Today, 0 notice was issued from  JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contracts of which 0 notices were stopped (received) by JPMorgan dealer ( house account) and 0 notices stopped by JPMorgan customer account. 

The total dealer comex gold slightly rose  tonight   to  672,042.157. oz or 20.90 tonnes of gold . The total of all comex gold (dealer and customer) rises again tonight  to  7,033,518.265 oz or  218.77 tonnes.

Tonight, we still have the continuing disturbing piece of news concerning the low dealer gold inventory for our  3 major bullion banks(Scotia, HSBC and JPMorgan). These 3 dealer gold inventory remains constant  tonight  at  an extremely low  16.666 tonnes.

i) Scotia:  168,579.128 oz or 5.240 tonnes
ii) HSBC: 153,821.82. oz or  4.784 tonnes
iii) JPMorgan:  214,144.712 oz or 6.660 tonnes

total: 16.684 tonnes

Brinks dealer account which did have  the lions share of the dealer gold saw its inventory level rise tonight  at  120,928.46 oz or 3.76 tonnes.  A few months ago they had over 13 tonnes of gold at its registered or dealer account.

Today we had 1 notice served upon our longs for 100  oz of gold. In order to calculate what will  standing for delivery in September, I take the total number of notices served  (219) x 100 oz per contract to give us 21,900 oz served to which I add the OI for Sept (84)  minus today's delivery notices at  (1)  to give us  83  contracts or  8300 oz yet to be served upon .  The total standing is thus :  25,800 oz of gold standing

Thus  we have the following gold ounces standing for gold in September

219 notices x 100 oz per contracts already served or 21,900 oz  + (84 OI  served - 1 OI notices filed today)x 100 oz to be served upon =   30,200 oz standing.
or (.939 tonnes).

We neither gained nor lost any gold ounces standing today.

Ladies and Gentlemen: we have a three-fold problem:

i) the total dealer inventory of gold remains constant tonight to  a very dangerously low  level of only 20.90 tonnes

ii)  a) JPMorgan's customer inventory remains constant at  246,327.488  oz but that will lower once delivery notices are served upon this inventory in October

ii  b)  JPMorgan's dealer account remains at 214,144.712 oz but all of that gold and them some is spoken for.

iii) the 3 major bullion banks have collectively only 16.684 tonnes of gold left in their dealer account.(JPMorgan, HSBC,Scotia)


now let us head over and see what is new with silver:


Sept 24/2013:  

Opening for the September contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 138,665.10 oz   (Scotia,CNT, Delaware, )
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil
No of oz served (contracts)10  (50,000 oz)
No of oz to be served (notices)128  (640,000)
Total monthly oz silver served (contracts) 2758  (13,790,000)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal of silver from the Customer inventory this monthxxxxxx

Today, we  had fair activity  inside the silver vaults.
 we had 0 dealer deposits and 0  dealer withdrawals.

We had 1 customer deposit:

Into CNT:  500,272.89 oz

total customer deposit: 500,272.89   oz

we had 3 customer withdrawals:

i) Out of CNT: 76,309.95 oz 
ii) Out of Delaware: 1937.10  oz
iii) Out of Scotia:  60,418.05 oz

total withdrawals:  138,665.10 oz
we had 0   adjustments  today

Registered (dealer) silver   :  43.351 million oz
total of all silver:  162.951 million oz.

The CME reported that we had 10 notices filed for 50,000 oz today
To calculate what will stand for this  active delivery month of September, I take the number of contracts served thus far this month at 2458  x 5,000 oz per contract = 13,790,000 oz to which we add the difference between the Sept OI (138)  and notices served upon today   (10)  =  128 contracts or 640,000 oz yet to be served upon.   The  total is thus 14,430,000 oz standing. 

In summary:

2758 contracts  x 5000 oz per contract (served) or 13,790,000 oz  +( 138 - 10) = 128 contracts still to be served upon to give us a grand  total standing of 14,430,000 oz


The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

And now the Gold inventory at the GLD:

Sept 24.2013:  in the last 9 days:  1.53 tonnes of gold left the GLD.



Value US$38,677,842,619.53

Sept 13.2013:   we lost a huge 6.01 tonnes of gold



Value US$38,600,943,636.26

The registered  vaults at the GLD will eventually become a crime scene as real physical gold  departs for eastern shores leaving behind paper obligations to the remaining shareholders.   There is no doubt in my mind that GLD has nowhere near the gold that say they have and this will eventually lead to the default at the LBMA and then onto the comex in a heartbeat  (same banks). 

As a reminder the total comex gold had inventories of around 11 million oz in 2011. Today the total comex gold remains to   7.033 million oz  (218.60 tonnes)

GLD gold:  909.59 tonnes.


And now for silver:

Sept 24.2013:  we gained 3.373 million oz of silver added to the SLV

Inception Date4/21/2006
Ounces of Silver in Trust340,883,814.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.

Sept 13/2013:

Inception Date4/21/2006
Ounces of Silver in Trust337,510,087.500
Tonnes of Silver in TrustTonnes of Silver in Trust
One metric tonne is equivalent to 1,000 kilograms or 32,150.7465 troy ounces.


And now for our premiums to NAV for the funds I follow:

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded  at Negative 6.4% percent to NAV in usa funds and Negative  6.5%  to NAV for Cdn funds.  Sept24.2013)

2. Sprott silver fund (PSLV): Premium to NAV fell to positive 2.28% NAV Sept24/2013
3. Sprott gold fund (PHYS): premium to NAV fell to negative..41% to NAV Sept24/ 2013

Note: Sprott silver trust back into positive territory at 1.66%. 
Sprott physical gold trust is back in negative territory at -.65%.

Central fund of Canada's is still in jail. 


Your opening gold/silver trading from Europe early this Friday morning:

(courtesy Goldcore)

$17 Trillion U.S. National Debt? Try $211 Trillion

Published in Market Update  Precious Metals  on 23 September 2013
By Mark O’Byrne

Today’s AM fix was USD 1,321.75, EUR 978.71 and GBP 824.34 per ounce.
Friday’s AM fix was USD 1,355.25, EUR 1,002.18 and GBP 845.39 per ounce
Gold dropped $39.30 or 2.92% Friday, closing at $1,325.30/oz. Silver slid $1.27 or 5.84%, closing at $21.74. At 3:32 EDT Friday, Platinum fell $31.30 or 2.1% to $1,427.50/oz, while palladium slipped $18.53 or 2.5% to $713.97 /oz. Gold was up 0.16% and silver was down 2.03% on the week.
Gold has been up and down in choppy trading in London today as investors digest the U.S. Fed's decision to wait on tapering until perhaps next month. Comments on Friday from James Bullard, the St. Louis Federal Reserve Bank President affected the markets.  He said, “a reduction of the Fed's $85 billion monthly bond purchase program beginning in October was possible and that the Fed can be patient in deciding when to scale back its pace of asset purchases”.
In Germany’s elections, Chancellor Angela Merkel is on her way for a third term as German leader after her party, the Christian Democratic Union (CDU) scored its best federal election result since 1990. However, it appears likely she has lost her coalition partner, the Free Democratic Party (FDP) as they failed to secure the required 5% threshold necessary and will be without Bundestag representation for the first time in its 65-year history.
Gold is finding support by the increasing consensus that the current Federal Reserve Vice Chair, Janet Yellen, will take over from Bernanke. Gold got a boost Thursday after a senior White House official's remarked that Yellen is a leading candidate to replace Bernanke when he steps down.
Yellen, a strong supporter of Bernanke's policies, should keep U.S. interest rates low for an extended period of time and she is very dovish, contrary to recent revisionism. 
The U.S. national debt continues to surge higher every day and is now at $16.95 trillion and will soon surpass the $17 trillion mark.
When Standard & Poor's reduced the U.S.’s credit rating from AAA to AA-plus, it was the first time the U.S. ever suffered a downgrade to its credit rating. The S&P took this action despite the plan Congress passed last week to raise the debt limit.
The downgrade, S&P said, "reflects our opinion that the fiscal consolidation plan that Congress and the administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."
It's those medium- and long-term debt problems that also worry economics professor Laurence J. Kotlikoff, who served as a senior economist on President Reagan's Council of Economic Advisers. He says the national debt, which the U.S. Treasury has accounted at about $14 trillion, is just the tip of the iceberg.
"We have all these unofficial debts that are massive compared to the official debt," Kotlikoff tells David Greene, guest host of weekends on All Things Considered. "We're focused just on the official debt, so we're trying to balance the wrong books."
Kotlikoff explains that America's "unofficial" payment obligations — like Social Security, Medicare and Medicaid benefits — jack up the debt figure substantially.
Laurence J. Kotlikoff served as a senior economist on President Ronald Reagan's Council of Economic Advisers and is a professor of economics at Boston University
"If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion. That's the fiscal gap," he says. "That's our true indebtedness."
We don't hear more about this enormous number, Kotlikoff says, because politicians have chosen their language carefully to keep most of the problem off the books.
"Why are these guys thinking about balancing the budget?" he says. "They should try and think about our long-term fiscal problems."
According to Kotlikoff, one of the biggest fiscal problems Congress should focus on is America's obligation to make Social Security payments to future generations of the elderly.
"We've got 78 million baby boomers who are poised to collect, in about 15 to 20 years, about $40,000 per person. Multiply 78 million by $40,000 — you're talking about more than $3 trillion a year just to give to a portion of the population," he says. "That's an enormous bill that's overhanging our heads, and Congress isn't focused on it."
"We've consistently done too little too late, looked too short-term, said the future would take care of itself, we'll deal with that tomorrow," he says. "Well, guess what? You can't keep putting off these problems."
To eliminate the fiscal gap, Kotlikoff says, the U.S. would have to have tax increases and spending reductions far beyond what's being negotiated right now in Washington.
"What you have to do is either immediately and permanently raise taxes by about two-thirds, or immediately and permanently cut every dollar of spending by 40 percent forever. The [Congressional Budget Office's] numbers say we have an absolutely enormous problem facing us."
UBS has updated their short-term gold targets today, increasing their one-month forecast to $1,450/oz from $1,250/oz and three-month to $1,375/oz from $1,350/oz citing the U.S. Fed's decision not to reduce its QE program as positive for gold. Additionally the U.S. fiscal and debt ceiling debates are imminent. Oct. 1st is the U.S. government shutdown date to be avoided and the market rhetoric will increase gold's safe haven status. Finally, UBS analyst Edel Tully noted the upcoming wedding and festival season in India followed by the Chinese Lunar New Year will all increase physical demand for the yellow metal. 
For breaking news and commentary on financial markets and gold, follow us onTwitter.


Turd Ferguson:  hopelessly broken!!

(courtesy TF Metals/Turd Ferguson)

TF Metals Report: Comex gold futures market is 'hopelessly broken'
Submitted by cpowell on 11:30AM ET Saturday, September 21, 2013. Section: Daily Dispatches
2:30p ET Saturday, September 21, 2013
Dear Friend of GATA and Gold:
The New York Commodity Exchange's gold futures market is "hopelessly broken," the playground of market-manipulating bullion banks that can move the price up and down at will to fleece naive speculators and investors as was done last week, Turd Ferguson of the TF Metals Report writes today. Ferguson adds that the bullion banks covered many short positions in Comex gold in the week prior to the Federal Reserve's surprising retreat from "tapering" its bond purchases. His commentary is headlined "Hopelessly Broken" and it's posted at the TF Metals Report's Internet site here:

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


There seems to be a plethora of propaganda following the Fed's failure to taper last Wednesday:

(courtesy Eric King/John Embry)

Avalanche of propaganda accompanies Fed's failure, Embry tells KWN

2:08p ET Monday, September 23, 2013
Dear Friend of GATA and Gold:
The Federal Reserve's inability to reduce its bond purchases is being accompanied by an avalanche of propaganda that includes extra suppression of the price of gold, Sprott Asset Management's John Embry tells King World News today. Government intervention is propping up the stock and bond markets while suppressing gold, Embry says, and thus is holding ordinary investors in the wrong assets, which will prove disastrous to them. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


The following is interesting!!

(courtesy GATA)

Bank of Thailand gets suspicious about paper gold

Bank of Thailand May Regulate Gold Trading to Curb Speculation
By Sarun Kijvasin, Suphannee Pootpisut, and Wichit Chaitrong
The Nation, Bangkok, Thailand
Monday, September 23, 2013
The Bank of Thailand is looking to regulate gold trading, as it suspects gold imports have been used to speculate on exchange rates. The central bank also want to protect retail investors who buy gold-linked financial papers.
"The Bank of Thailand has been consulting with the Finance Ministry and the Securities and Exchange Commission on how to regulate trading of gold-forward contracts in order to make them transparent and protect the interests of ordinary investors," BoT Governor Prasarn Trairatvorakul said.
He added that the BOT wanted gold brokers and traders to disclose information about their transactions outside the Thai bourse's futures exchange.
The central bank has detected unusual gold imports that may be linked to currency speculation, he said.

"We have found substantial discrepancies between values in US dollars and the volume of gold imports."
The central bank has come under pressure this year because of the high volatility of the dollar/baht exchange rate. At the same time, gold prices have also experienced high fluctuation, both globally and locally.
Gold importers can acquire unlimited amounts of dollars to fund their trades, but those wanting to buy foreign currency without any underlying business need permission from the central bank, Prasarn said.
While Thai jewellery manufacturers may not be involved in currency speculation, some importers could be using gold imports to cover up their speculative activities, he said.
Previously, central bank officials met with gold traders to discuss sharing information about their market activities, he said.
The governor is also concerned about the transactions of gold-linked papers, especially forward contracts transacted outside Thailand Futures Exchange. Some operators could be selling gold papers online to retail investors and taking advantage of their customers, he said.
"We don't worry about gold futures trading, since it is under supervision by the authorities. However, nobody looks after gold forward contracts."
Asked whether the authority may impose some measures to limit imports of gold as the Indian government does to address its current-account deficit, Prasarn replied that it was not necessary.
Currently, the Thai government does not collect tariffs on gold imports, and it also waives the 7-per-cent value-added tax for registered jewellery manufacturers.
Gold imports in the first seven months of this year were worth US$10.86 billion (Bt337 billion), or 8.28 per cent of total import value.
Thailand ran a current-account deficit of 0.2 per cent of gross domestic product in the second quarter but if gold imports were excluded, the current account would have been in surplus. But Prasarn does not see gold import as a threat to the current-account balance.
On the outlook for interest rates, the BOT governor said they could remain lower than in the past, since central banks around the world, particularly the US Federal Reserve, have injected massive amounts of liquidity into the market and kept policy rates extremely low.
"In the future, the rates may move to a new normal that will be lower than past levels."
He noted that even if the US economy recovers fully, the nominal interest rate could end up around 2 percentage points lower than before the 2008 crisis, when the benchmark 10-year US Treasury yield was about 4-5 per cent per annum.
For Thailand, the current policy rate of 2.5 per cent is accommodative for economic growth, he added.


Jim Rickards states that the next world monetary system will be rebuilt around gold;

(courtesy JIM Rickards/GATA)

Rickards expects world monetary system to be rebuilt around gold

9:58p ET Sunday, September 22, 2013
Dear Friend of GATA and Gold:
Geopolitical strategist and fund manager James G. Rickards tells Peak Prosperity's Chris Martenson that he has been advising governments that want to devalue their currencies to buy gold rather than other currencies, since at least they'll end up keeping the gold. Rickards sees the continuing flow of gold from West to East as evidence that the world monetary system eventually will be rebuilt around gold. Having just published his best-selling book "Currency Wars," Rickards says he is working on a book about the collapse of the monetary system, "The Death of Money," due to be published next year. Rickards' interview with Martenson is 32 minutes long and can be heard at the Peak Prosperity Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Your overnight market sentiment from Europe early this Wednesday morning

Key points

1. Lack of fireworks from the German Election
2. However Merkel will need a grand coalition
3. Italian bank, Monte de Peschi undergoing a partial bond bail in.
4. Details from Jim Reid/Deutsche bank

(courtesy zero hedge/Jim Reid/Deutsche bank)

Lack Of Fireworks In German Election Aftermath Means Sideways Open

Tyler Durden's picture

The German elections came and went, with Merkel initially said to have an absolute majority, but in the end being forced to design a Grand Coalition. Still, the punditry has been tripping over each other desperate to make that result (or any other result) positive for Europe , which despite now paving the way for policy continuity, together with the latest round of less than impressive Eurozone PMIs (following the strongest China HSBC PMI in 6 months) failed to inspire appetite for risk in Europe this morning where stocks have traded mixed. What is amusing is that everyone expected, the second Merkel gets reelected things in Europe would start going pump in the night - sure enough, the Italian FTSE-MIB is underperforming in early trade amid reports that Italy's economy minister Saccomanni threatened to step down if the country does not stick to its pledges it made to the European Commission. However to a certain degree, the negative sentiment towards Italy was offset by €4.8bln of coupon payments and €24.1bln of redemptions from Italy which is eligible for reinvestment this week. With a second Greek 2-day strike in one week scheduled for Tuesday and Wednesday, look for Europe's catalytic event to unclog, now that the German political picture is set, culminating with the 3rd (and 4th) Greek bailouts and probably more: after all Europe now needs a lower EURUSD (recall Adidas' warning), and that usually means a localized crisis.
Overnight in Asia, the September HSBC flash manufacturing PMI numbers for China printed a 6-month high, while the new export orders component rose to its highest level in 10-months. Though overall trade volumes were light given the absence of market participants from Japan, where markets remained closed for Autumnal Equinox holiday. Going forward, given how markets reacted to Fed’s Bullard’s comments on Friday where he suggested the September decision not to taper was a “borderline” decision, today’s speeches from Fed’s Lockhart, Dudley and Fisher will be closely watched. Other B-grade economic data on the docket is the Chicago Fed and the Markit US PMI, both largely ignored.
Overnight event bulletin from RanSquawk and Bloomberg:
  • Italy's economy minister Saccomanni is ready to step down if the country does not stick to its pledges it made to the European Commission.
  • Treasuries 5Y and longer post modest declines before speeches by Dudley and Fisher (FOMC voters next year) and $97b note auctions begin tomorrow with $33b 2Y notes.
  • Hardening positions on the U.S. federal budget and borrowing limit, and recent political setbacks suffered by both Obama and Republican congressional leaders are raising the odds of a government shutdown, debt default or near-miss
  • Merkel begins her search for a third-term coalition partner a day after an overwhelming election win gave her the biggest vote tally since Kohl’s post-reunification victory of 1990
  • HSBC/Markit’s China manufacturing PMI rose to a six-month high in September, signaling that a rebound in the world’s second- largest economy is gaining steam
  • A euro-area manufacturing and services gauge rose more  than estimated this month, a separate Markit report showed
  • Homes approved for construction in the U.K. rose 49% in the 2Q as government assistance boosted mortgage lending and building permits became easier to get
  • Sovereign yields mostly higher. EU peripheral spreads narrow. Japan closed for holiday. European stocks mostly lower, U.S. equity-index futures gain. WTI crude gains, gold and copper fall
Asian Headlines
Chinese HSBC Flash Manufacturing PMI (Sep) M/M 51.2 vs. Exp. 50.9 (Prev. 50.1) - 6-Month high. New Export Orders at a 10-month high of 50.8 vs. Prev. 47.2.
EU & UK Headlines
German Federal Election Results: German Chancellor Merkel's party victory in the German elections appears just short of the votes needed to rule on its own and may have to convince leftist rivals to join a coalition. German Chancellor Merkel's CDU/CSU received 41.5% in the election with all districts counted, meaning Merkel's block need to form an alliance with other parties in a coalition. The Liberal FDP party failed to achieve 5% of votes needed to get into Parliament, as such, Merkel will now be forced to reach out to a different partner.
Italy's economy minister Saccomanni is ready to step down if the country does not stick to its pledges it made to the European Commission, citing his need to defend credibility.
ECB's Liikanen has said the ECB remain 'ready to act' on a new Long-Term Refinancing Operation.
In other Eurozone related commentary, according to sources, the ESM is hiring investment banks to advise on potential rescues of banks amid fears that black holes in the financial system could be unearthed in a move toward a banking union.
Eurozone Manufacturing PMI (Sep P) M/M 51.1 vs. Exp. 51.8 (Prev. 51.4)
Eurozone Services PMI (Sep P) M/M 52.1 vs. Exp. 51.1 (Prev. 50.7)
German Services PMI (Sep A) 54.4 vs. Exp. 53.1 (Prev. 52.8)
German Manufacturing PMI (Sep A) 51.3 vs. Exp. 52.2 (Prev. 51.8)
French Manufacturing PMI (Sep P) M/M 49.5 vs. Exp. 50.1 (Prev. 49.7)
French Services PMI (Sep P) M/M 50.7 vs. Exp. 49.6 (Prev. 48.9)
US Headlines
Late last Friday, Fed's Bullard said low inflation allows Fed to be patient and if US payrolls and unemployment continue to show improvement, greater likelihood of tapering. Said bond buying still an effective tool for Fed and wants to see evidence that inflation is rising before endorsing policy action by FOMC.
Election results in Germany, which despite now paving the way for policy continuity, together with the latest round of less than impressive Eurozone PMIs failed to inspire appetite for risk in Europe this morning. As a result, stocks in Europe traded mixed, with the Italian FTSE-MIB underperforming in early trade amid reports that Italy's economy minister Saccomanni threatened to step down if the country does not stick to its pledges it made to the European Commission. On the sector breakdown, utilities and technology stocks underperformed, while modest tightening in credit spreads following the widening on Friday ahead of elections in Germany supported financials in Europe.
EUR/USD traded steady, with implieds better bid, as market participants eye next upside barriers at 1.3600. The pair  was also pressured by touted EU Common Agricultural Policy-related selling of EUR/GBP, which also saw the cross make a test on the 10DMA line at 0.8407.
Analysts at Citi have increased near-term gold and silver price on the back of recent Fed actions to delay tapering and now expect gold to average USD 1250/oz in 2014 from USD 1,145 and sliver USD 20.20/oz from USD 18.00.
The outlook for the bulk commodities continues to deteriorate and analysts at Citi expect the thermal coal price and iron ore price to come under near term pressure. Furthermore, the banks expects 3-month iron-ore to trade at USD 115/ton.
Hedge funds cut bullish gold bets for a second week, reducing long contracts to the lowest since June. According to CFTC, the net-long gold position held by speculators fell 17% to 70,113 futures and options in the week ended Sept. 17. Bullish silver wagers fell 16% to 13,992 in the first two-week decline since May.
Syria have completed the handover of an inventory of its chemical weapons arsenal by the deadline given by US and Russian authorities, according to the chemical weapons watchdog OPCW.
Russia's Chief of Staff has said clarity will emerge within a week on where al-Assad keeps his chemical weapons arsenal and Russia could change their position on Syria if they become convinced the President's forces are cheating. Separately, Russia's foreign min. Lavrov has said Russia is prepared to send troops to Syria to operate in a observer capacity.
China's August crude imports from Iran are up 17.5% Y/Y, a figure that was 9.8% higher than that of July.
Total have announced that within the next three years they expect to see an increase in annual production. This comes as the group anticipate a trend down in 2014 investment with the co. entering a production growth phase and a period of free cash flow.
* * *
Jim Reid recaps the full overnight narrative:
Results of the German Federal election take centre stage this morning. Preliminary final results indicate that Merkel’s conservative CDU/CSU bloc has scored a decisive victory with a combined 41.5% of the vote. Though the result leaves Merkel just short of a majority in the Bundestag it is significantly better than pre-election polls had suggested. It also gives her a large advantage over the main opposition Social Democrats which finished well behind  with 25.7%, according to estimates published by the Federal Returning Officer early on Monday morning. There was a sour note to Merkel’s victory - her preferred coalition partners, the Free Democrats, will likely be left out of the Bundestag after losing 9% of support relative to the last election leaving the party below the 5% threshold which would allow them to hold seats in parliament. The Free Democrats’ likely outster from the lower house marks the end of 64 years of parliamentary representation (Reuters). The far Left party took 8.6% of the vote, followed by the Green Party with 8.4%. The eurosceptic Alternative for Germany party took 4.7%, also falling short of the 5% hurdle. If Merkel ends up short of an absolute majority, and the Free Democrats are indeed left out of the Bundestag, the general expectation is that Merkel’s conservative bloc will seek some form of “grand coalition” with the Social Democrats with whom she governed from 2005 to 2009. We’ll hear more about this when German party leaders meet today for coalition talks.
The election result will probably be viewed as positive for Eurozone markets given that its the CDU/CSU’s best election result in 20 years. This will give Merkel a strong hand in coalition talks with other major parties even if there is some short-term uncertainty about who her partners will be. Indeed, EURUSD opened about 0.2% higher overnight shortly after exit polls were made public but has given up most of those gains to trade virtually unchanged from Friday’s closing level of 1.352 as we type.
Elsewhere overnight, markets are fairly quiet with Japan out for a public holiday and Hong Kong markets shut this morning due to a typhoon warning. The HK stock exchange is due to re-open shortly. Sentiment has received a small boost from the September HSBC flash manufacturing PMI numbers for China which beat expectations by 0.3pts (51.2 vs 50.9 expected). The reading is a full 1.1pts above the final August reading of 50.1 and is the highest HSBC manufacturing PMI in six months. The two month gain in the index is now +3.5pts which marks the strongest 2 month improvement in nearly 4 years. In other details of the report, new export orders printed at a 10-month high of 50.8. The data has helped Chinese A-shares (SHCOMP +0.7%) but gains there are also partly reflecting post-FOMC sentiment given that Chinese markets have been closed since last Wednesday. AUDUSD is 0.3% higher this morning and copper (-1.4%) is off the overnight lows. Asia EM sovereign credit is a little weaker overnight, which is mostly a follow-on effect of last Friday’s price action.
Turning to the week ahead, the focus remains on the Fed with about 12 speeches from Fed officials lined up over the next five days. The Fedspeak begins with speeches by Lockhart, Dudley and Fisher later today. This week’s speeches will be closely watched given how markets reacted to St Louis Fed’s Bullard’s comments on Friday where he suggested the September decision not to taper was a “borderline” decision. Bullard also suggested that October’sFOMC was a “live” meeting, which helped drive the S&P500 and the MSCI EM indices to close 0.72% and 0.92% weaker respectively on Friday. On the topic of Fed speeches, the WSJ reported late on Friday that the Economic Club of New York has cancelled an upcoming speech by Janet Yellen as the White House moves closer to selecting a new head of the central bank. The group said Friday that the Oct. 1 speech by Ms. Yellen had been called off but gave no reason.
Staying in the US, budget talks continue this week in an attempt to pass a resolution to fund government operations beyond October 1st. Note that House Republicans passed a bill on Friday that will fund the government but defunds the Obamacare programme. That bill looks unlikely to pass the Democrat controlled Senate though. The key US data releases to look out for this week include today’s flash PMI, consumer confidence and S&P/CaseShiller home price index tomorrow, durable goods orders and new home sales on Wednesday, the third estimate of 2Q 2013 GDP, jobless claims and pending home sales on Thursday, and personal income/consumption on Friday. In Europe, the focus will clearly be on coalition talks today in Germany.
Elsewhere Draghi is due to speak at the European Parliament today (he will also speak in Milan on Friday). Today’s main data releases are the flash manufacturing and services PMIs for Germany, France and the Euroarea. Consensus estimates are calling for a further 0.2pt to 0.4pt improvement in the manufacturing and service PMIs. Looking further out this week, other important data include the Germany IFO survey on Tuesday, French jobseekers data on Wednesday and Euroarea money supply data on Thursday. A busy week on both sides of the Atlantic.


We now have the beginnings of a major "bail in" at Monte de Pasci

(courtesy zero hedge)

It Begins: Monte Paschi "Bails In" Bondholders, Halts $650 Million In Coupon Payments

Tyler Durden's picture

Recall that three weeks ago we warned that "Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization" although we left open the question of "who will get the haircut including senior bondholders and depositors.... given the small size of sub-debt in the capital structures." Today, as many expected on the day following the German elections, the dominos are finally starting to wobble, and as we predicted, Monte Paschi, Italy's oldest and according to many, most insolvent bank, quietly commenced a bondholder "bail in" after it said that it suspended interest payments on three hybrid notes following demands by European authorities that bondholders contribute to the restructuring of the bailed out Italian lender. Remember what Diesel-BOOM said about Cyprus - that it is a template? He wasn't joking.
As Bloomberg reports, Monte Paschi "said in a statement that it won’t pay interest on about 481 million euros ($650 million) of outstanding hybrid notes issued through MPS Capital Trust II and Antonveneta Capital Trusts I and II." Why these notes? Because hybrid bondholders have zero protections and zero recourse. "Under the terms of the undated notes, the Siena, Italy-based lender is allowed to suspend interest without defaulting and doesn’t have to make up the missed coupons when payments resume." Then again hybrids, to quote the Dutchman, are just the template for the balance of the bank's balance sheet.
Why is this happening now? Simple: the Merkel reelection is in the bag, and the EURUSD is too high (recall Adidas' laments from last week). Furthermore, if the ECB proceeds with another LTRO as many believe it will, it will force the EURUSD even higher, surging from even more unwanted liquidity. So what to do? Why stage a small, contained crisis of course. Such as a bail in by a major Italian bank. The good news for now is that depositors are untouched. Unfortunately, with depositor cash on the wrong end of the (un)secured liability continuum it is only a matter of time before those with uninsured deposits share some of the Cypriot pain. After all, in the brave New Normal insolvent world, "it is only fair."
To wit:
In the new world we’re in, bondholders pick up the tab when they can be forced to,” said John Raymond, an analyst at CreditSights Inc. in London. “State aid rules impose losses where possible.”
European Union Competition Commissioner Joaquin Almunia told reporters on Sept. 7 the bank should receive final approval for its restructuring plan within two months. The lender, which received a 4.1 billion-euro bailout, submitted a revised plan that more than doubles the amount of new capital it intends to raise to 2.5 billion euros as it seeks to repay the aid.
Almunia recommended that “cash outflows from the beneficiary to hybrid capital holders and subordinated debt holders be prevented to the maximum extent possible,” in a letter sent to Italian Finance Minister Fabrizio Saccomanni dated July 16 and seen by Bloomberg News.
More importantly, this is just the start:
Monte Paschi’s 108 million euros of undated, non-cumulative trust preferred stock issued through Antonveneta Capital Trust II fell 5 cents on the euro to 41 cents, according to Bloomberg bond prices. That’s the lowest price since April 23, data compiled by Bloomberg show.

While the bank is halting payments on the bonds that make up its Tier 1 capital, the most-junior layer of debt capital instruments, it also has the equivalent of about 2.6 billion euros of more-senior Upper Tier 2 debt in three issues in euros and pounds.

While Monte Paschi is making payments on these notes, it isn’t clear that it will be able to go on doing so, said Raymond.
Expect an update from the bank on Wednesday when it will hold a conference call. 
Investors may be betting the bank will buy back the debt “at or slightly below current trading levels,” according to Eva Olsson, an analyst at Mitsubishi UFJ Securities in London. Individual investors in Italy hold many of the bonds and have been an important source of funds for banks in recent years, she said.

"Monte likely will have to raise capital next year and we view any capital raising exercise in the market as challenging,” Olsson wrote.
Indeed, and best of luck. As for how "bailed in" capital figures in terms of a bank's equity buffer/Tier 1 capital


A terrific commentary from Bill Holter on the uSA's loss of credibility:

(courtesy Bill Holter/Miles Franklin)

When credibility is lost

I've spoken of "credibility" quite a bit lately and hopefully won't bore you with this but "credibility" has been lost in all the wrong places.  Shortly I will get to exactly where we've lost it but I want to go over again why "credibility" is so important in so many ways.  First, if you don't trust someone for whatever reason, will you do business with them?  If you are currently doing business with someone and lose "trust" in them, will you continue to do business with them?  Generally the answer is no and in this case with the U.S. it means less commerce, less flow, and as the Chinese and Russians have just displayed...less use or need for Dollars.  The loss of "trust" is happening at the wrong time for the U.S..  No time is the "right time" but we have our backs up against the wall in the credit markets and no one wants to buy our Treasury bonds.  "Credibility" is the only reason that our creditors lent to us in the first place and why they have accepted "Dollars" all these years.  Losing credibility will have a direct affect on the Dollar and more importantly its purchasing power.
  So where have we lost credibility?  At this point, maybe a better question would be "where do we still have any credibility left?" as the list would be far shorter.  I guess I'll start with the most recent episode of the Fed conning the market with "no taper".  Fed presidents and governors "hinted" for so long that we'd get a September announcement of QE reduction.  President Obama even came right out in public at the G-20 meeting and said as much...but, it didn't happen.  As I've said before, it didn't happen because they cannot slow the monetization process one bit or the financial markets will collapse...on the other hand they HAVE to slow it because they are becoming too big of a player and soaking up too much precious collateral from the markets.  In a nutshell, for 6 months or more the Fed has "bagged" and conned the markets with this.  Only a day after the fact there are already Fed governors out there again telling us about an October or December taper ...
  Next up to the plate are the hilarious budget and debt ceiling negotiations, these ought to be a spectacle.  We have not had a budget passed for 4 or 5 years...what kind of way is this to run a country?  Not just any country mind you, THE country that issues THE reserve currency for the rest of the world.  Let me put this in simple perspective, would you hire a roofer who's roof leaks, a cobbler with holes in his own shoes or an accountant on his way to jail for tax evasion?  Of course not...but we have become so accustomed to the world accepting Dollars that we believe it to be some sort of God ordained right when in fact it came about in the first place because we had a huge Gold horde, a great business reputation, the best and fairest judicial system, the world's most solid economy which was all backed up by the strongest military in the world (what could possibly go wrong?).  My point is this, we were "awarded" as the issuer of the reserve currency because we deserved it, now we look like falling down fiscal drunks who don't know our way home.  No budget, $1 trillion deficits, an insolvent Central Bank, bogus financial and economic numbers and...(sorry Obama supporters) a president that said in public "raising the debt ceiling doesn't increase our debt" . 
  Moving along, (again I apologize to those who drank the Kool Aid beforehand) we as a nation have had scandal after scandal that outwardly puts us in a piss poor light as far as the rest of the world is concerned.  A couple of the scandals, NSA/Snowden and SWIFT directly affect foreigners as they believe (now know) that even they have been spied on.  We have had so many scandals and things "that just don't smell right" that any foreigner who isn't on the floor laughing at us would surely not be getting their checkbook out to purchase either Treasuries or Dollars.  We also lost significant credibility over Syria.  Yes I am sure that the world breathed a collective sigh of relief but left solely up to the current administration, Syria would still be smoldering.  We went into Iraq and created a disaster based on lies as the world watched helplessly, Syria as it turns out is a different story because other than Israel (and no longer even France) we have NO COALITION at all. 
  All one needs to do is listen to what the idiots in Washington have to say to understand that "we" as Americans have intellectually lost it.  From Hillary's "what difference does it make" to Kerry's "red line" to Obama's (nearly anything that he says with or WITHOUT a teleprompter) it's all disingenuine and not believable.  I am not just picking on Democrats here, McCain and Lindsey Graham were (are) ready to blow the world up at the drop of a hat so the Democrats haven't cornered the market on lying and stupidity.
  Have I covered all of the bases?  No, surely not as I've only scratched the surface here.  We have a central bank's monetary policy, fiscal policy, Executive branch, Congress, regulatory agencies, reporting agencies for economic and financial numbers...that continue to damage and destroy "credibility" that took over 200 years to attain.  This hasn't happened overnight but the erosion is now on a fast track.  Everywhere that you look "we" (America) are doing the wrong thing or "wronging" someone, somewhere.  Business "can" and in fact used to be done in a manner where both parties benefitted, this is hardly the case now as the U.S. doesn't produce anything much other than "Dollars" for export.  We are now at the mercy of foreigners, of our retain our current bloated standard of living.  This will not last and the change will be drastic.
  Before finishing I do want to mention the "action" after the FOMC meeting on Wednesday. First, the news was obviously leaked and there was frontrunning in the Gold market.  Though this is illegal it should be well known that information is leaked all over the place and the markets are not fair...but this is not what I want to talk about.  "Speed" is the topic.  If you look at any charts from immediately after the announcement you will see that the huge moves in just about everything you can name ALL took place in 5 minutes or less.  Yes, in just 5 minutes 95% of the moves were made and completed.  Basically, if you blinked you missed it entirely.  This creates both opportunity and danger.  As you know by now, I am a believer that a "reset" will occur.  Leading up to any reset I believe we will see "gaps" in everything in different directions.  "Gaps" as in big price movements with little or zero trading taking place.  Gaps down in Treasuries, gaps both up and down in stocks and gaps up in most commodities and the precious metals.  These "gaps" will in part be caused by fundamentals beginning to take over but also because of leaked information regarding any future reset.  The "opportunity" is that if you are positioned correctly the market action may be so swift that it won't allow you to make an error by selling.  On the other hand, the "danger" is that if you are not positioned correctly ahead of never will and you'll not be given a chance to correct your error...
  The Fed blundered bigtime on Wednesday and tossed much of their remaining credibility overboard by contradicting their own "recovery" story.  I plan to write tomorrow regarding the next probable target of "evil speculators"...The Fed itself.  Regards,  Bill H.


Another great commentary from Bill Holter on what happens to the dollar when huge gobs of paper money are printed

(courtesy Bill Holter/Miles Franklin)

The "Buck" will stop at the Fed.

Back in the fall of 2008 I wrote that this entire financial episode would end up in the "lap of the U.S. Treasury".  It has but I did not think it all the way through back then (or I was na├»ve in how far they would go).  Yes, the Treasury has in fact blown out their balance sheet through outright borrowing, loan guarantees and other promises but...the game goes on.  It is now apparent to me that the game won't end until the Fed's itself is questioned.  The loss of credibility (there's that word again) caused by last Wednesday's non taper "bagging" of the financial markets will probably commence the "interrogation process".
  What I am getting at here is that the finances, balance sheet and solvency of the Fed will now come under scrutiny.  Needless to say, they will be found wanting.  From a balance sheet of under $800 million in 2008 when the financial fiasco began, they will top $4 trillion by the end of this year.  Foreigners are left scratching their heads as Thurs. and Friday saw Fed governors speak of "taper" by December while already this morning 2 other Fed governors have spoken of easier policy for longer and even larger which is it?  Like I wrote yesterday, "where is the credibility in this"?  Now that the Fed's balance sheet has gotten so large I suspect that the time for speculators to trade AGAINST the Fed rather than with them cannot be too far off.  In other words, large holders (they will be explained away as "evil speculators") of Treasuries may not even need to hear the word "taper" to push the sell button as it becomes apparent that the Fed is the first, last, only and best bid out there to sell into.
  Last week Warren Buffett describe the Fed as the world's "greatest" hedge fund in the world.  In a nutshell, if you can print unlimited amounts of money then you never have to worry about "losing".  It's like going to a casino and doubling down on each and every hand...surely you will win one hand right"?  THIS is what the Fed is doing with each successive and larger QE and what they are doing with their balance sheet.  In theory they have no limitation whatsoever as to how much they can monetize, in practicality they have limits because of the amounts of collateral they are pulling from the system.  They do know this and is the reason they are testing a "reverse repo" system to drain reserves while adding collateral.  In one of THE best posts ever by Zerohedge, the complicated process is explained and debated here .
  I titled this piece "the Buck will stop at the Fed" because as with any nation that deficit spends or prints (monetizes) to better their standard of living, it all will inevitably show up in the currency, "the Buck".  Up until now whenever the Fed and literally the entire world would dance to their tune.  Now the "tune" is confusing.  We hear taper and more QE from different governors on the same day and the message is unclear.  It is unclear because there IS NO ANSWER.  It's merely a matter of time before Dollars from all different directions are returned to the U.S. in "return to sender" fashion.  The massive inflation that we have exported all of these years will come back, all at once and be presented to the only buyer...The Fed. 
  I must chuckle because years ago in college finance classes I can remember the Fed being described as "the lender of last resort".  Yes they were back in 2008-09 but they have now set themselves up as THE only buyer.  Yes I know, they are "lending" technically but in reality it is FORCED buying.  If they don't buy, no one else will and the "value" of their $4 trillion balance sheet?  Well, maybe "still" $4 trillion but certainly less in terms of eggs, potatoes, barrels of oil or ...Gold ounces.  Think back to your schoolyard days and the big bully who ran the show.  Little by little, people would "turn" on him until he had no friends (through coercion or not) left.   Then would come payback as 4 or 5 kids would join up and whip the snot out of him after school.  This is where we are now with the Fed.  The world collectively understands that we bullied them and took advantage of our "right" to (over)issue the reserve currency.  They are joining together (Russia, China, Africa, Brazil, India etc.) and doing deals exclusive of the U.S. and without the use of Dollars.  Treasuries are already coming back home...and now that the Fed has publicly told the world that there will be no end to the printing...they will come home even faster.
  The sell off in Treasuries started because of "taper talk" back in April but will now continue because "he who sells first, sells best" when it comes to a bubble.  And yes, the Fed, the Treasury, the Dollar...IS the bubble.  We know it, they know it, everyone knows it and the focal point will be testing the Fed's strength and ability to take back what we pawned off on foreigners in the first place.  John Connally said to the world in the early 1970's that "the Dollar is our currency but it's your problem".  He was correct then because we still had the ability to provide and manufacture for ourselves...and a lower Dollar actually helped our competitiveness short term.  Now however it is OUR problem because the Dollars (Treasuries) will be sent back home to us as we are the only buyers left.  From a financial standpoint there is no worse a position to be in than over indebted and having a currency that no one wants.  On the bright side...we can always pay the Treasuries off with freely printed Dollars so we won't "really" be broke after all...technically!  Regards,  Bill H.


Monday morning : Portuguese 10 year bond yield: flat in basis points from Friday night: 7.14%... still very dangerous!


As of 02:30:00 ET on 09/23/2013.


Your closing 10 year Portuguese bond yield Monday night: an increase of  2 basis points from this morning 



7.160.02 0.22%
As of 11:59:00 ET on 09/23/2013.

(courtesy zero hedge)


Your closing Japanese yield Monday morning:

Japan Govt Bond Year to maturity 10 Year Simple Yield


0.700.02 2.51%
As of 09/20/2013.


And now for your closing Japanese 10 year bond yield from NY:  (flat  from this morning)

Japan Govt Bond Year to maturity 10 Year Simple Yield


0.700.02 2.51%
As of 09/20/2013.

As of 04:31:00 ET on 09/23/2013.

Your opening currency crosses this Monday morning:

EUR/USA:  1.3510  down   .0015
USA/JAPAN YEN  98.92    up .067
GBP/USA  1.6047    up .0043
USA/CAN  1.0301  down   .0002

This morning the Euro is slightly weaker trading just above the 1.35 level at 1.3510.  The yen is a little weaker this morning trading below  the 99 cross. It closed in Japan down 7 basis points at 98.92 yen to the dollar  (dollar up). The pound again is showing major strength as it again rises to just above the 1.60 level  to 1.6047.  The Canadian dollar is also showing minor strength rising to 1.0301 to the dollar.

USA dollar Index Monday morning: 80.40 down 3 cents.

The NIKKEI this morning: down 23.76 points or 0.16%

The USA 10 year bond yield: 2.74%.

 Silver this morning: $22.72

Gold this morning: $1322.00

Early morning trading sentiment over in Europe: negative with most of European bourses in the red. 

Your closing Spanish 10 year government bond: Monday night down 2 basis points in yield from Friday  night. The Spanish banks are still very busy buying the sovereign bonds.



4.280.02 0.56%
As of 11:59:00 ET on 09/23/2013.


Monday closing Italian 10 year bond yield:  down 2 basis points and trading one basis point below Spain.

Italy Govt Bonds 10 Year Gross Yield


4.270.02 0.51%
As of 12:00:00 ET on 09/23/2013.

Closing currency crosses for Monday night/USA dollar index/USA 10 yr bond: 

Euro/USA:  1.3499  down .0027
USA/Japan:  98.74 down  .584
Great Britain/USA:  1.6052 up .0046
USA/Canada:  1.0277 down .0022

The euro fell slightly in this afternoon  session closing just below the 1.35 level to 1.3499.  The yen slightly strengthened  in the afternoon as it gained 55 basis points on the day  closing well below the 100 level to 98.74. (dollar down). The British pound gained big time this afternoon to 1.6052. The Canadian dollar rose smartly during  the afternoon to 1.0277.

Your closing USA dollar index:

80.44 up 1 cent on the day.

Your closing 10 year USA bond yield: down 3 basis points in yield from Friday 

US Generic Govt 10 Year Yield


2.700.03 1.20%

As of 15:38:00 ET on 09/23/2013.



Closing bourses figures for Monday:

i) England/FTSE  down 39.06 points or  0.59% 

ii) Paris/CAC down 31.58  points or 0.75%
iii) German DAX: down  40.44 points or  0.47%  
iv) Spanish ibex down 62.30  points or 0.68%

v) Italian bourse (MIB) down 56.94  or  0.32%

and the Dow down 39 points  or 0.25% ....


And now the big USA stories of the day:


First the Doves hit the wires:  (including NYFED Dudley)..MORE QE and no taper

The Doves Hit The Tape: Dudley, Lockart Plead For More QE

Tyler Durden's picture

As expected, here come the first two doves "explaining" the reasons behind Bernanke's taper surprise last week:
And Lockhart adds to the chorus:
Translation: much more "high-quality collateral" to be extracted from the system.
Some of the highlights from the just released Dudley speech:
As we move into 2014, the fiscal headwinds should abate somewhat.  As that occurs, the improving underlying fundamentals of the economy should begin to dominate, pushing up the overall growth rate.  But this is just a forecast, it has not been realized yet.  That is one reason why I supported the FOMC’s decision last week to maintain the current pace of our Treasury and mortgage-backed security purchases.  In my view, the economy still needs the support of a very accommodative monetary policy.  Adjustments to that policy need to be anchored in an assessment of how the economy is actually performing, how financial conditions are evolving, and how this affects the longer-term outlook and the risks around it. Our decisions on how to adjust our policy tools—for example, the pace of asset purchases and forward guidance with respect to the level of short-term rates—must be rooted in the ongoing flow of information that informs our judgments about the prospects for a sustainable recovery.  Decisions on the pace of asset purchase and forward guidance must be based on what is most appropriate to achieve our dual mandate objectives of maximum sustainable employment in a context of price stability.
What about the mandate to make Congress irrelevant from a governance standpoint and letting the Fed "get to work"?
Here is Dudley admitting that the main reason for no taper is... because of the impact by the Fed's own trial balloon with tapering from early this year on rates and "financial conditions"
The most notable recent headwind, of course, has been the large amount of fiscal drag this year from the payroll and income tax increases and the budget sequester.  Also noteworthy is the tightening of financial market conditions that has occurred since May. 
Additionally, Dudley does away with all pretense, and finally uses the taboo word "taper" not once but twice:
Several questions have emerged following the meeting.  Most noteworthy was—given that market expectations were skewed towards anticipating the beginning of a taper at this meeting—why the Committee did not begin to reduce the pace of asset purchases.  Although I can’t speak for the Committee, I can provide some reasons for my own decision.  

To begin to taper, I have two tests that must be passed:  (1) evidence that the labor market has shown improvement, and (2) information about the economy’s forward momentum that makes me confident that labor market improvement will continue in the future.  So far, I think we have made progress with respect to these metrics, but have not yet achieved success.   

With respect to the first metric, we have seen labor market improvement since the program began last September. Over this time period, the unemployment rate has declined to 7.3 percent from 8.1 percent.  However, at the same time, this decline in the unemployment rate overstates the degree of improvement.  Other metrics of labor market conditions, such as the hiring, job-openings, job-finding rate, quits rate and the vacancy-to-unemployment ratio, collectively indicate a much more modest improvement in labor market conditions compared to that suggested by the decline in the unemployment rate.  In particular, it is still hard for those who are unemployed to find jobs.  Currently, there are three unemployed workers per job opening, as opposed to an average of two during the period from 2003 to 2007.

With respect to the second metric—confidence that the economic recovery is strong enough to generate sustained labor market improvement—I don’t think we have yet passed that test. The economy has not picked up forward momentum and a 2 percent growth rate—even if sustained—might not be sufficient to generate further improvement in labor market conditions. Moreover, fiscal uncertainties loom very large right now as Congress considers the issues of funding the government and raising the debt limit ceiling.  Assuming no change in my assessment of the efficacy and costs associated with the purchase program, I’d like to see economic news that makes me more confident that we will see continued improvement in the labor market. Then I would feel comfortable that the time had come to cut the pace of asset purchases.
In other words, never.
Next, despite last week's admission by Bullard that tapering is tightening, Dudley is still holding on to the old party line:
... any decision to cut the pace of asset purchases should not be taken as signaling an early exit from this period of unusually low short-term rates.  We have established a threshold of 6.5 percent for the unemployment rate as long as we do not expect inflation to exceed 2 ½ percent at a one-to-two year horizon and inflation expectations remain well-anchored.   It is likely to take a considerable amount of time to reach the 6.5 percent unemployment rate threshold.  Moreover, because the 6.5 percent unemployment rate is a threshold, and not a trigger, depending on the economic circumstances, we might wait a long time after we breach the threshold before we begin to raise our federal funds rate target.

The point I wish to emphasize is that any decisions on the pace of asset purchases (the rate at which we are adding accommodation) versus liftoff in terms of the federal funds rate (a tightening of monetary policy) should be viewed as largely independent of one another.  One does not foreshadow the other—certainly not in any mechanical way or with a definitive timeframe.   As Chairman Bernanke noted in last week’s press conference, our actions are data dependent and how the data will evolve is uncertain.
Nothing like losing even more confidence that the Fed is largely clueless about what is going on.
Finally, it is all Bush's fault. Or in this case that epic credit-bubble financial crisis that the Fed caused, the the Fed is now, five years later, still scrambling to fix...
... it is important to recognize that the financial crisis generated significant headwinds that are only slowly abating.  We must push against these headwinds forcefully to best achieve our objectives.  
... how? With an even greater credit bubble.


Then the hawks responded: we want a taper!!!

And the Fed has credibility?????

(courtesy zero hedge)

Another Fed President Confirms Fed Credibility Undermined

Tyler Durden's picture

We have heard from the doves, now the hawks. Dallas Fed's Fisher (a non-voting member) pulls no punches in his speech this morning. Confirming Esther George's comments last week, and our views on the same:
But that was not it. The well-known hawk went to warn that:


The USA misses the big PMI number.  Most of the data now shows the USA entering into a tailspin!!

(courtesy zero hedge)

US PMI Misses Expectations To 3-Month Lows; Orders And Employment Tumble

Tyler Durden's picture

Despite exuberance at European and Chinese PMIs, the US clean shirt just skidded with a miss. Against expectatins of a high YTD 54.0 print, PMI posted 52.8 - its lowest in 3 months and falling for the second month in a row. New orders fell at the slowest pace since April (boding ill for durable goods) and theemployment sub-index grew at the slowest pace in 3 months(suggesting payrolls will not hold up well). Of course, as Markit notes, bad news is good news "as far as policymakers are concerned there are some worrying signals in relation to the sector’s growth momentum, which vindicate the Fed’s decision to hold off on tapering its asset purchases."

From Markit:
Employment growth also slowed, reflecting manufacturers’ concerns about the strength of future demand and the on-going need to boost productivity to remain competitive at home and abroad. The sector is consequently not helping to bring unemployment down


Well that about does it for tonight.
I will see you tomorrow night



Joep Meloen said...

214,144.712 oz or 6.666 tonnes is not true. It is 6.6606 tonnes.

JTX said...

Harry, you say, "With no gold entering the dealer side it seems almost impossible for the bankers to settle upon longs once the December contract hits." That sounds suspiciously like a prediction, i.e., that COMEX will most likely default in December. Is that what you're saying? I, for one, don't believe it. They've kept this Ponzi going on for a long time, and I doubt it's on the verge of ending this year.

disqus_Rbfqk4GGqp said...

I have corrected the tonnage to read 6.6607 tonnes.


We have witnessed no gold enter the dealer from Jan 1/2013 to now.

Generally speaking around 20 tonnes of gold stands in December.

We should get at least 5 to 7 tonnes in October and maybe one tonne in November.

That should put a severe hole in the dealer inventory.

Wil said...

Thanks Harvey,

It looks like deliveries are delayed more and more. or are they really settled.
I am amazed the huge future volumes on daily trades, while hardly nobody is taking delivery.
if th aluminum delviery was deleyed up tot 16 months, how much delay is possible for gold before the comex called default.?

JTX said...

There's a difference between a "severe hole" and something that's "almost impossible" to accomplish. I'm pointing out that Harvey uses hyperbole at times and leaves the reader hanging. He's made a very provocative statement here (and repeated it for weeks). I think it needs explanation. Does he expect the COMEX to default or are there other potential outcomes?

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