Bubble Monster! Central Bank Continued Surrender Leading To Declining VIX, Reduced VIX Positions And Rising SMART Money Flow Index

As I wrote at the beginning of The Fed’s quantitative easing (QE)  ventures back in 2008, The Fed will never be able to “normalize” monetary policy. As we have seen, The Fed has all but quit rate hikes and has annoucned end an to QT (quanitative tightening) in the Fall.

In celebration of the eternal Central Bank monetary stimulus, S&P500 volality (VIX) is collapsing … again as VIX Futures open interest is shrinking. Accordingly, the SMART Money Flow Index is rallying as investors see Central Bank surrender.

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The global Central Bank asset purchase bonanza!!

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Coupled with low rates.

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The Fed and other Central Banks are contuning to run their bubble machines!

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Here is a video of The Federal Reserve.

S&P 500 e-mini Futures On The Rise Again As China Signals Growth (UST 10Y-3M Curve Turns Positive Again!)

China signalled positive manufacturing growth and the market react positvely.
(Bloomberg) — Stocks strengthened worldwide as strong manufacturing data out of the world’s second largest economy (China) helped ease investor worries about a slowdown in global growth. Treasuries extended losses after as a gauge of U.S. factories topped estimates in March.
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The S&P 500, Dow and Nasdaq were all in the green. Shares of Lyft dropped below its IPO price as analysts noted there is limited visibility into the company’s path to growth and profitability. The Stoxx Europe 600 Index climbed on the heels of its best quarter in four years after key China manufacturing PMIs for March beat the highest estimate in Bloomberg surveys of economists. That’s despite manufacturing data for Europe coming in at the lowest since 2013, which briefly caused the euro to pare some of its gains.
E-mini S&P 500 futures are on the rise … again!
 

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And the 10 year – 3 month yield curve turned positive!

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“The Sag” In The US Sovereign And Dollar Swaps Curve Continues, But Germany, UK And Japan Curves Are Sagging Too!

It’s the same all over the world.

The US Treasury actives curve and dollar swaps curves are markedly sagged (or kinked).

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But other countries are experiencing curve sags as well, but just not as pronounced. Germany, Japan, UK and France are all sagging, but less notably.

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Numerous risks abound in the global economy such as Brexit, China trade disagreement, etc.

On the other hand, there is Venezuela which has entered a seemingly permanent sag.

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And the SAG award goes to … the USA for short-term SAG.

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The permanent SAG award goes to …. Nicolas Maduro and Venezuela.

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Fed Vice Chair Clarida Notes That Yield Curve Is Getting Flatter (But Inverted From 1 Year To 5 Years)

Former Columbia University economic professor and curret Fed Vice President Richard Clarida made one obvious point at a Dallas Fed meeting, and one half-truth.

(Bloomberg) — Federal Reserve Vice Chairman Richard Clarida said that when rates on shorter-dated bonds move above rates on longer-dated bonds, it can be a signal that an economic slowdown is coming.

“Historically in the U.S., inverted yield curves are actually pretty rare — they aren’t black swans, but they don’t happen a lot, and when they do happen that is typically a signal that the economy is either slowing sharply or could even go into a recession,” Clarida said Monday at an event at the Dallas Fed.

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Clarida drew a distinction between flat and actually inverted curves.

“Right now the yield curve in the U.S. is not inverted” but “it is getting flatter,” Clarida said. He noted that the Fed pays a lot of attention to whether the curve is flattening because of a fall in inflation expectations. And he said that monitoring the curve is complicated by the fact that U.S. markets are impacted by global demand for safe assets. “What happens in Europe and Asia can have an impact on our Treasury market, too.”

Well Professor Clarida, your statement is only partially correct. The US Treasury yield curve (green) is actually inverted from 1 year – 5 years. THEN upward sloping after 5 years. The US Dollar Swaps curve is inverted from 3 months to 4 years then upward sloping.

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Now, if you want to talk about a downward sloping yield curve, take Venezuela. Please!

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Another curve that is shaped like a rollercoast at King’s Dominion is the US Dollar Overnight Indexed Swaps curve.

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So Professor Clarida is only semi-correct about curve shapes. There is inversion from 1 year to 5 years, possibly signalling a slowdown (or recession) in the 1-5 year period.