Japan Bond Market Halted For Second Day In A Row -
With every modestly positive datapoint being desperately clung to, now that even Goldman's Hatzius has once more thrown in the economic towel after proclaiming an economic renaissance in late 2012 just like he did in late 2010 only to issue a mea culpa a few months later (and just as we predicted - post coming up shortly), the key prerogative is to ignore the elephant in the room. That, of course, is that the JPY 1 quadrillion bond market had to be halted for the second day in a row as the Japanese capital markets are fast becoming a very big and sad joke. The resulting flight to safety from Japanese investors, who sense that their own bond market is on the verge of breaking down completely, has managed to send French and Belgian bonds to record lows, the Spanish 2 Year to sub 2%, the German 6 month bill negative in the primary market, the US 10/30 year constantly bid and so on. The immediate result is that the bond-equity disconnect continues to diverge until one day we may get negative 10 Year rates coupled with an all time high stock market. Gotta love the fake New Normal market, in which the Japanese penny stock market was up another 2.8% to well over 13,000 even as the Shanghai Composite plumbs ever redder territory for 2013 on fears the birdflu contagion will hurt the already struggling economy even more.
As for the good news, there wasn't much. German Industrial Production beat estimates handily even as the general economy and stock market continues to deteriorate, printing at 0.5%, on expectations of +0.3%. This however came at the price of a downward revision in the prior month, which was revised from 0.0% to -0.6%. Alternatively, the EURUSD which dropped to an overnight low of 1.2970 before beginning its overnight levitation coinciding with Europe open, has been doing everything in its power to ignore the fact that Portugal, as BNP summarized it, is rapidly moving toward a second bailout in the aftermath of this Friday's much discussed constitutional court decision, and subsequent announcement that public workers may be paid in Treasury bills instead of cash. The Portugal-German spread has blown out as a result, but so far the damage has been contained and the EURUSD is ramping to overnight highs, oblivious in its certainty that the Portuguese "lack of cash" haircut will not be a template, nor a blueprint, and is a very, very special situation.
Macro newsflow out of the US will be light this week, however all eyes will be on yet another quarter of weak corporate data, with Alcoa as usual kicking off earnings season after the close. Markets will be sure to ignore weak cash flow data as well, just as they have been great at largely ignoring the rapid deterioration in the macro data in the month as well.
Bloomberg's bulletin notes the other various key overnight highlights:
Treasuries steady as JPY falls to 99.01 vs USD, weakest since May 2009; third day of declines after BoJ said last week it would boost monthly bond purchases to $76b.
Friday’s weak U.S. non-farm payrolls will put a stop to QE tapering discussion, at least until it becomes clearer on whether the slowdown is just a soft patch, Goldman’s Jan Hatzius writes in client note
Portugal will carry out more spending cuts this year and ruled out further tax increases after the Constitutional Court blocked a plan to suspend a monthly salary payment to state workers and pensioners
Distrust of the Fed and concern that U.S. dollars may become worthless are fueling a push in more than a dozen states to recognize gold and silver coins as legal tender
Slovenia’s creditworthiness is deteriorating as investors speculate a banking crisis will force it to follow the island nation and become the sixth euro country to need aid
German industrial production rose 0.5% in Feb., more than 0.3% est.; Jan. revised to -0.6% from previous 0.0%
North Korea may detonate a nuclear device and carry out a missile test together as early as this week, South Korea’s government said
David Cameron will take his case for a more flexible EU to Spain, France and Germany this week, seeking the alliances he needs to renegotiate Britain’s status within the 27-member bloc
Nikkei gains 2.8%; European markets, U.S. index futures gain. Energy gains, precious metals lower
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