By Doug Noland
Credit Bubble Bulletin: Just the Facts
The S&P500 added 0.5% (up 6.7% y-t-d), and the Dow increased 0.5% (up 6.1%). The Utilities gained 0.9% (up 14.7%). The Banks jumped 2.2% (down 0.7%), and the Broker/Dealers rose 2.0% (down 3.2%). The Transports advanced 1.6% (up 5.8%). The broader market was strong. The S&P 400 Midcaps gained 1.2% (up 12.9%), and the small cap Russell 2000 rose 1.1% (up 10.2%). The Nasdaq100 added 0.3% (up 4.5%), and the Morgan Stanley High Tech index increased 0.4% (up 9.7%). The Semiconductors gained 0.7% (up 21.6%). The Biotechs declined 1.4% (down 14.8%). With bullion recovering $8, the HUI gold index increased 0.7% (up 115%).
Three-month Treasury bill rates ended the week at 32 bps. Two-year government yields dropped five bps to 0.79% (down 26bps y-t-d). Five-year T-note yields fell four bps to 1.19% (down 56bps). Ten-year Treasury yields dipped three bps to 1.60% (down 65bps). Long bond yields were unchanged at 2.28% (down 74bps).
Greek 10-year yields rose six bps to 7.93% (up 61bps y-t-d). Ten-year Portuguese yields were unchanged at 3.01% (up 49bps). Italian 10-year yields gained four bps to 1.17% (down 42bps). Spain’s 10-year yield jumped eight bps to 1.02% (down 75bps). German bund yields increased two bps to negative 0.05% (down 67bps). French yields added two bps to 0.19% (down 80bps). The French to German 10-year bond spread was unchanged at 24 bps. U.K. 10-year gilt yields surged 16 bps to 0.72% (down 124bps). U.K.’s FTSE equities index gained 0.8% (up 10.4%).
Japan’s Nikkei 225 equities index rallied 3.5% (down 11.1% y-t-d). Japanese 10-year “JGB” yields rose four bps to an almost six-month high negative 0.04% (down 30bps y-t-d). The German DAX equities index rose 0.9% (down 1%). Spain’s IBEX 35 equities index jumped 2.9% (down 6.7%). Italy’s FTSE MIB index rose 2.0% (down 20%). EM equities were mostly higher. Brazil’s Bovespa index jumped 3.3% (up 38%). Mexico’s Bolsa gained 0.9% (up 11%). South Korea’s Kospi was unchanged (up 3.9%). India’s Sensex equities jumped 2.7% (up 9.2%). China’s Shanghai Exchange was little changed (down 13.3%). Turkey’s Borsa Istanbul National 100 index slipped 0.3% (up 7.2%). Russia’s MICEX equities index increased 0.5% (up 13.8%).
Junk bond mutual funds saw outflows of $387 million (from Lipper).
Freddie Mac 30-year fixed mortgage rates rose three bps to 3.46% (down 43bps y-o-y). Fifteen-year rates gained three bps to 2.77% (down 32bps). Bankrate’s survey of jumbo mortgage borrowing costs had 30-yr fixed rates unchanged at 3.57% (down 48bps).
Federal Reserve Credit last week dropped $19.5bn to $4.418 TN. Over the past year, Fed Credit declined $19.4bn. Fed Credit inflated $1.607 TN, or 58%, over the past 199 weeks. Elsewhere, Fed holdings for foreign owners of Treasury, Agency Debt sank $18.5bn last week to a two-year low $3.188 TN. “Custody holdings” were down $158bn y-o-y, or 4.7%.
M2 (narrow) “money” supply last week jumped $27.7bn, surpassing $13 TN for the first time ($13.021 TN). “Narrow money” expanded $871bn, or 7.2%, over the past year. For the week, Currency increased $1.4bn. Total Checkable Deposits gained $24.5bn, and Savings Deposits rose $12.4bn. Small Time Deposits were little changed. Retail Money Funds declined $10.9bn.
Total money market fund assets fell $10.5bn to $2.724 TN. Money Funds rose $46bn y-o-y (1.7%).
Total Commercial Paper sank $22.6bn to an almost one-year low $981bn. CP declined $51bn y-o-y, or 4.9%.
September 1 – Bloomberg (Robin Ganguly and Justina Lee): “China’s yuan has doubled its share of global currency trading in the three years through April 2016, according to the latest triennial survey conducted by the Bank for International Settlements. The yuan’s average daily turnover rose to $202 billion in April from $120 billion in the same month of 2013, boosting its ratio of global foreign-exchange trading to 4% from the previous 2%… That puts the currency in eighth place overall. Dollar-yuan became the sixth-most traded currency pair, advancing from ninth place in 2013, BIS said, while the yuan overtook the Mexican peso as the most actively traded emerging-market currency.”
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