Spanish Bonds Put in a Tenth Day of Rally Making it the Largest Run Since 2005

“Spain’s bonds advanced for a 10th day, the longest run since 2005, after its borrowing costs fell at a debt sale as investors bet the European Central Bank will limit volatility caused by a political stalemate in Italy.

Benchmark Spanish 10-year yields fell to the lowest level since November 2010 after Economy Minister Luis De Guindos said yesterday he expected to see economic growth by year-end. The ECB agreed to an unlimited debt-purchase program to cap borrowing costs of highly indebted euro-area nations in September. Italian bonds climbed for the first time in three days. German bunds rose for a second day after a report confirmed inflation slowed in February.

“We have the ECB backstop and without it we’d be in a more volatile situation,” said Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “It’s a supporting factor for the periphery,” he said, referring to the euro bloc’s most indebted members.

Spanish 10-year yields dropped four basis points, or 0.04 percentage point, to 4.72 percent at 11:02 a.m. London time. The 5.4 percent bond maturing in January 2023 rose 0.305, or 3.05 euros per 1,000 euro ($1,301) face amount, to 105.245.

Spain’s Treasury sold 5.83 billion euros of six- and 12- month securities, beating its upper goal of 5.5 billion euros for the sale, the Madrid-based Bank of Spain said. It sold six- month bills at an average yield of 0.794 percent, down from 0.859 percent on Feb. 12. The 12-month securities yielded 1.363 percent, down from 1.548 percent….”

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“Foreign-exchange strategists are convinced that Italy’s new government will maintain austerity measures that preserved the currency union during the region’s sovereign crisis even as the euro tumbles from a 14-month high.

Analysts raised their second-quarter forecasts for the 17- nation currency to $1.32 from $1.28 at the end of December as Italy’s Feb. 24-25 election ended without a clear winner, according to the median of more than 60 estimates in a Bloomberg News survey. That 3.1 percent increase is the second-biggest among the Group of 10 currencies after the Swedish krona.

While traders pushed the euro down to $1.3018 today from this year’s high $1.3711 on Feb. 1 as anti-austerity parties led by three-time premier Silvio Berlusconi and former comedian Beppe Grillo won blocking minorities in the Senate, strategists are looking to the debt markets. Italy’s borrowing costs have fallen from a three-month high on Feb. 27 as European Central Bank President Mario Draghi said his untapped bond-buying program, known as Outright Monetary Transactions, remains in place as an “effective” backstop…..”

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India’s industrial output rose more than economists estimated in January following policy changes by the government to bolster an economy expanding at the weakest pace in a decade.

Production at factories, utilities and mines climbed 2.4 percent from a year earlier after a revised 0.5 percent drop in December, the Central Statistical Office said in a statement in New Delhitoday. The median of 28 estimates in a Bloomberg News survey was for a gain of 1.3 percent.

The government in last month’s budget said it will trim the fiscal deficit to a six-year low, seeking to reduce inflation risks and boost the central bank’s scope to cut interest rates. Wholesale prices probably increased at the slowest pace in more than three years in February, the median estimate in a Bloomberg survey shows before a report due March 14.

“Amidst expectations of a stretched and gradual demand revival, a sharp upswing in output is unlikely,” Tirthankar Patnaik, a Mumbai-based strategist at Religare Capital Markets Ltd., said before the release. The central bank will probably lower borrowing costs at next week’s policy meeting, he said….”

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“The U.K. Serious Fraud Office has opened an investigation into allegations of wrongdoing by managers at Autonomy Corp., the software maker acquired and later written down by Hewlett-Packard Co. (HPQ)

The SFO informed Hewlett-Packard of the investigation Feb. 6, and follows the U.S. Justice Department in probing Autonomy, Palo Alto, California-based Hewlett-Packard said in a filingyesterday with the U.S. Securities and Exchange Commission. Mike Lynch, Autonomy’s founder and former chief executive officer, has rejected allegations of wrongdoing.

Hewlett-Packard last year accused Autonomy managers of misrepresenting results before selling the company for $10.3 billion in 2011. The writedown and faltering performance of the acquisition are complicating efforts by Chief Executive OfficerMeg Whitman to revive growth after years of botched deals, management tumult and diminishing demand for personal computers.

“As a result of the findings of an ongoing investigation, HP has provided information to the U.K. Serious Fraud Office, the U.S. Department of Justice and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to and in connection with HP’s acquisition,” Hewlett-Packard said….”

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“Germany’s Bundesbank almost doubled its risk provisions in 2012, citing increased potential for losses stemming from the European Central Bank’s monetary policy.

The Frankfurt-based central bank increased provisions for general risks by 6.7 billion euros ($8.7 billion) to 14.4 billion euros, it said in an e-mailed statement today when releasing its 2012 annual report. Due to higher interest income, the Bundesbank’s profit rose to 664 million euros from 643 million euros in 2011. The increase in provisions stems from the ECB’s enhanced support of the financial sector over the course of the year, the Bundesbank said.

“The past year had seen an overall increase in counterparty credit risks stemming from refinancing loans and purchasing bonds,” Bundesbank President Jens Weidmann said in the statement.

The ECB injected more than 1 trillion euros into the banking system with two three-year refinancing loans designed to avoid a credit crunch. Some 22 percent of those loans have since been paid back as the ECB’s pledge to buy unlimitedgovernment bonds if certain conditions are met eased tensions on financial markets.

Weidmann reiterated in a foreword to the annual report that the Bundesbank is critical of some of the measures taken by the ECB because “they blur too much the responsibilities of monetary and fiscal policies.”

Declining Inflation…”

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“China’s stocks fell for a fourth day, the longest stretch of losses in three months, on speculation regulators may resume initial public offerings. Drugmakers, financial stocks and small-company shares dropped.

Kangmei Pharmaceutical Co. (600518) tumbled 3.9 percent, sending a gauge of health-care companies to its lowest level in three weeks. China Life Insurance Co. slid 1.7 percent as shares resumed trading after a suspension. Ping An Bank Co. paced declines for lenders as the China Securities Journal said the banking regulator may stop some banks from operating wealth management businesses if they fail to improve their products.

The Shanghai Composite Index (SHCOMP) slid 1 percent to 2,286.61 at the close, the biggest loss since March 4. The CSI 300 Index declined 1.4 percent to 2,555.61. The ChiNext index of start-ups dropped 3.4 percent, the most since Nov. 27.

“The possibility IPO share sales will resume is spooking the market,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which oversees $285 million. “Small-caps will bear the brunt if IPO suspensions are lifted as the majority of the new listings come from small-sized companies. That’ll drag down valuation of small-caps.”

Today’s losses pared the Shanghai Composite’s gain this year to 0.8 percent. Data over the weekend showed industrial output had the weakest start to a year since 2009 and lending and retail sales growth slowed.

“The worry about the strength of the economic recovery persists,” said Wu of Dazhong.

Smallcaps Drop…”

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“The Australian and New Zealand dollars reached the highest levels in more than four years versus the yen amid speculation the Bank of Japan (8301) will expand monetary easing, boosting the allure of higher-yielding assets.

The so-called Aussie rose against most of its major peers as investors pared bets on interest-rate cuts by the Reserve Bank of Australia. The nation’s bonds dropped, sending the 10- year yield to the highest since May. The New Zealand dollar declined against the greenback amid concern a drought in the nation will hurt its economy. Haruhiko Kuroda, the nominee to become the Bank of Japan’s next governor, yesterday signaled readiness for a quick expansion in monetary stimulus.

“The suggestion that Kuroda may ease policy before the April 4 meeting has given the yen a push lower” against crosses including the Aussie and kiwi currencies, said Michael Turner, a fixed-income strategist in Sydney at Royal Bank of Canada. “Expectations for rate cuts in Australia are falling, and as long as the data keeps printing OK, that’ll keep yields grinding higher.”

The Australian dollar rose 0.2 percent to 99.14 yen at 5 p.m. in Sydney, after earlier touching 99.58, the highest since August 2008. The currency was unchanged at $1.0281.

New Zealand’s dollar reached 79.90 yen, the highest since July 2008, before trading at 79.53, 0.3 percent below yesterday’s close. The so-called kiwi declined 0.4 percent to 82.47 U.S. cents.

BOJ Nominees

Kuroda said yesterday that the bank would consider buying derivatives as part of its easing efforts. Kikuo Iwata, a nominee for deputy governor, said today in upper house confirmation hearings the central bank can end deflation solely through buying government debt. Japan’s central bank will next meet for two days ending April 4….”

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“The euro weakened, commodities retreated and U.S. equity futures fell. The yen strengthened after an opposition lawmaker said the Democratic Party of Japan would oppose the nomination of Kikuo Iwata for deputy governor of the central bank, damping bets for greater monetary stimulus.

The 17-nation shared euro slid 0.3 percent to $1.3010 at 9:33 a.m. London time. Standard & Poor’s 500 Index futures slipped 0.1 percent, while the Stoxx Europe 600 Index (SXXP) rose 0.3 percent. Soybeans dropped on signs that demand for the U.S. crop may be waning, and the Hungarian forint retreated 0.7 percent versus the euro, falling to a nine-month low, as inflation slowed. The yen climbed against all of its 16 major peers, rising most against the rand….”

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It is being reported that large positions of being short Yen while long Dollar are being closed out. If this is the case then, traders are expecting a larger shift in the market place. Story developing…..

World Markets

Currencies

Commodities

USD Libor

Euribor

Yields for Italy, Spain, France,  and Germany …

“However, the specifics of that proposal don’t spring to mind as easily as the reforms being bandied about in Republican circles, such as providing seniors with vouchers to pay for premiums or raising the retirement age.

That’s partly because Obama last laid out his reforms in February 2012 as part of his budget proposal. The president did little more than touch on these plans on the campaign trail last year and again in last month’s State of the Union address.

But as policy makers dig in for an extended battle on deficit reduction, Obama’s Medicare reform plans are likely to get a lot more attention soon. Rep. Paul Ryan is expected to release his budget, which will update the GOP’s proposals to rein in health care spending on the elderly, on Tuesday.

The president’s plan focuses mainly on reducing payments to drug companies and hospitals, though he would also raise revenue by asking wealthy seniors and new beneficiaries to pay more. All told, his reforms would cut health care spending by $400 billion, according to updated estimates by the White House.

Here’s are some of the key things that Obama would do:

Pay less for drugs: Increase the rebates the government receives for Medicare beneficiaries’ medications so they are the same as the rebates given under the Medicaid program. This would save $140 billion.

Reduce payments for post-hospital care: Bring payments for skilled nursing and rehabilitation facilities, long-term care hospitals and home health care more in line with costs. Reduce payments to facilities with high rates of hospital readmission. Reduce payments to rehab centers for certain conditions, such as knee replacements and hip fractures, so they are more comparable with skilled nursing homes. Make sure centers are treating patients with greater need. This would save $50 billion….”

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“Rep. Jan Schakowsky (D-IL), a member of the Democratic Party’s leadership in the House of Representatives, suggested to Jason Mattera at a Feb. 13 women’s rights rally that plans for an assault weapons ban and private-sales background checks were only the beginning of a broader gun control agenda extending to handguns as well.

Schakowsky evidently did not recognize Mattera, a conservative video journalist and senior investigative reporter for Talk Radio Network, who infamously confronted Vice President Joe Biden in the Capitol. (Mattera introduced himself to Schakowsky by name but did not indicate that he was filming or that he is conservative.) She spoke to Mattera as if he were a fellow gun control enthusiast–and Mattera played along, eliciting answers about Schakowsky’s enthusiasm for gun control….”

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“Based upon very long-term charts and commentary from Hoisington Investment Management Company, for some time we have speculated that the 30-year bond rate would continue downward to around 2%. However, the charts are showing strong technical evidence that interest rates may be turning up in the long term.

The  monthly chart below shows bond rates going back to 1948, at which time long bond rates were about 2%. After the 1981 peak, rates have trended downward toward, we assumed, the historical low. Now it appears that the bottom is in and that rates are heading higher.

Note that the monthly PMO has turned up from its second most oversold level in 50 years, and has crossed up through its 10-EMA, rendering a PMO buy signal.

Zooming in on a 23-year monthly chart we can see a long-term double bottom (2008 and 2012). This compares with the lower PMO low, which sets up a reversal divergence (bullish). We can also see that yield has broken above a declining tops line drawn from the 2011 top…”

Full article and charts

“These days, Marks sees disquieting signs of another credit bubble, though it is just in “the fifth inning.” Central banks are pumping money into economies with abandon. And rates have descended to levels that hardly compensate investors for the risks incurred.

The leveraged buyout market, too, is heating up again, with private-equity firms willing to pay price-to-cash-flow ratios at the elevated levels of 2006, if not the absurd ratios of 2007.

Debt issuance, particularly of high-yield bonds and leveraged loans, is soaring. Individuals and pension funds, though hardly complacent about risk….”

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“WASHINGTON (Reuters) – Illinois agreed on Monday to settle federal civil securities fraud charges alleging the state misled municipal bond investors about how it funded its pension fund obligations.

Illinois was not ordered to pay a penalty under the terms of the settlement with the U.S. Securities and Exchange Commission. However, the state implemented a number of remedial actions beginning in 2009 and cooperated with the SEC’s probe. It settled the case without admitting to or denying the SEC’s charges….”

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“The Republicans’ point person on fiscal issues in Congress said on Sunday that compromise with President Barack Obamais possible on taxes and spending even though his soon-to-be-unveiled budget plan faces certain rejection from Obama’s Democrats.

Rep. Paul Ryan, the chairman of the House of Representatives Budget Committee, acknowledged that Democrats who control the Senate are likely to defeat his proposal to repeal Obama’s signature health-care law and other elements of his plan to balance the budget within 10 years.

But Ryan, whose ideas on taxes and spending gained national prominence when he was selected as the Republican vice presidential candidate last year, said Democrats and Republicans might be able to agree on less dramatic steps that would narrow budget deficits in coming years….”

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“Apple stock just popped on a rumor that the company will dig into its mountain of unneeded cash and issue a big fat “special dividend” to shareholders.

On the one hand, this is a positive: Apple should do something with the cash.

On the other hand, it’s a negative: Of the three most sensible ways to return cash to shareholders, a “special dividend” is the least flexible and least efficient.

The two other options are:

• Increase in the regular dividend (perhaps at least a doubling)
• A major stock buyback

Of these two options, the stock buyback is the most efficient and flexible option.

Why?

Because of dividend taxes.

Apple’s stock is owned by a lot of small, taxpaying shareholders.

These shareholders will get hit with up to a 23.8% tax on any dividends thanks to the recent tax increase…..”

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No rules for NYC!

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“The Standard & Poor’s 500 Index approached a record high and a gauge of market volatility slipped to the lowest level in almost six years as Apple Inc. (AAPL) rallied and banks advanced.

Apple jumped 1.2 percent, erasing earlier losses. BlackBerry surged 14 percent following a report that Lenovo Group Ltd. may consider buying the smartphone maker. Ford Motor Co. added 2.9 percent as deliveries in China jumped. Dick’s Sporting Goods Inc. tumbled 11 percent after forecasting profit that was less than analysts estimated. Kroger Co. lost 1 percent after being downgraded by a Hilliard Lyons analyst.

The Standard & Poor’s 500 Index added 0.2 percent to 1,554.41 at 3:29 p.m. in New York, trading within about 11 points of its record. The Dow climbed 29.68 points, or 0.2 percent, to 14,426.75, heading toward its fifth straight record close. The Chicago Board Options Exchange Volatility Index dropped to its lowest level since 2007. Trading in S&P 500stocks was 18 percent lower than the 30-day average.

“The path of least resistance continues to be higher,” Jordan Irving, who helps oversee $175 million at Irving Magee Investment Management in Philadelphia said in a phone interview. “The latest batch of economic data out of the U.S. was okay. If you’re lagging you might want to try to get a little juice in there to catch up.”

More than $10 trillion has been restored to U.S. equity values during the four-year bull market as the S&P 500 more than doubled from the bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Fed. The Dow recouped all its losses from the financial crisis in less than 65 months, more than a year faster than the recovery from the Internet bubble.

Volatility Index

The CBOE Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, dropped 6.6 percent to 11.76 today, the lowest level since April 2007. The gauge, known as the VIX, fell 18 percent last week and is down 35 percent for the year….”

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We’re going to get an announcement from the company as to how they intend to reallocate some of their cash,” Ward said in an interview today on Bloomberg Radio’s “Surveillance” withTom Keene. “They will put a floor under their stock at a higher price than it is today.”

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“Experts are split on what’s behind this huge 4-year long bull market.

Some believe it has been driven by improving fundamentals.  Others believe it has been driven by the Federal Reserve’s easy monetary policy.

In a recent note, BTIG’s Dan Greenhaus noted that the S&P 500 climbed 128 percent during a period when earnings jumped 129 percent.

In other words, he believes there’s a strong case to be made that the market reflects an earnings-driven rally.

But economist David Rosenberg believes that this assessment is faulty.

He takes a page out of Lakshman Achuthan’s book and notes that year-over-year earnings growth has gone negative. From Rosenberg’s Friday research note:

If contraction and recession are synonymous, then an earnings recession is already underway. These talking heads on CNBC are talking about an ‘earnings-driven rally’. I have no clue what they are talking about. My database is from Haver Analytics, who get their numbers from Standard & Poor’s, and the latest update was on March 6th. And at last count, S&P 500 Q4 operating EPS is running at -1.7% on a YoY basis, and at a $23.32 estimate right now for last quarter, it is actually running only moderately above the level prevailing in Q4 2006 ($21.99). So on this basis, earnings have only eked out a mere 0.8% annualized gain over the past seven years.

Rosenberg offers this chart…”

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