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U.S. Dollar Holds on To Gains Ahead of FOMC

November 1, 2017 James Stanley 0

Today at 2PM brings another FOMC rate decision, and while all eyes are on December for the next Fed move, Dollar bulls are holding on to support ahead of the statement. The post U.S. Dollar Holds on To Gains Ahead of FOMC appeared first on Forex news f…

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Treasurys Gain, Curve Flattens After Refunding Auction Sizes Remain Unchanged

November 1, 2017 Tyler Durden 0

When previewing today’s FOMC announcement, we said that at least according to some, this morning’s refunding announcement may have a bigger impact on the market as there is less consensus (and more confusion) about what would be unveiled. As JPM analyst Jay Barry told Bloomberg, the quarterly refunding announcement at 8:30am ET Wednesday “has the possibility to be a bigger event for markets in the morning than the Fed statement in the afternoon” as participants are divided on whether the Treasury will announce increases to coupon auction sizes Wednesday, or wait until the 1Q refunding announcement in February:

“There’s a dispersion of views because of the pivot the Treasury Department has had over last few years,” specifically toward portfolio metrics and aiming to extend the weighted average maturity of the portfolio. Merely reversing the cuts that have been made to 2Y and 3Y auctions since 2013 wouldn’t serve that objective. “If they don’t get announced tomorrow, it’s a muted rally, and if they do, it’s a muted steepening.”

Furthermore, as Bloomberg summarizes, going into today’s announcement, market participants were divided leading into the announcement with most seeing no increase immediately to auction sizes just yet, seeing only bill auction changes for now: Barclays, NatWest, Bank of America, Credit Agricole, Jefferies, Stone & McCarthy Research Associates and Citigroup all saw no change; JPMorgan Chase, among other, looked for small increases across maturities.

Well, moments ago the US Treasury reported the breakdown of the refunding auctions, which led to Treasuries promptly paring some early losses (and leading to the predicted muted curve flattening) after the Treasury Department maintained its coupon auction sizes over the next three months, while the refunding statement did not comment on ultra-long issuance.

Specifically, the Treasury announced a $62.0 billion Refunding package this morning, unchanged from recent Refundings. The Refunding auctions will consist of a $24.0 billion 3-year note, a $23.0 billion 10-year note and a $15.0 billion 30-year bond. Treasury has held the 3-year note auction size steady at $24.0 billion since the beginning of 2015, and the 10-year and 30-year Refunding auction sizes steady since February 2016.

However, while Treasury said again this morning that they will not change the size of nominal coupon auctions during the quarter ahead, they did note that the beginning of the Fed’s balance sheet roll-off means they expect to announce “gradual adjustments” to nominal coupon and 2-year FRN auction sizes at the February Refunding. While the sizes of those changes remain to be decided, they expect the result will be that the weighted average maturity of debt outstanding will stabilize around current levels, “with the caveat that unexpected large changes in borrowing needs could have an unforeseen impact on future issuance and ultimately the level of WAM.”  To wit:

Given the announced changes to the Federal Reserve’s reinvestment policy for its System Open Market Account (SOMA) portfolio and projections for the fiscal outlook, in addition to increasing bill supply, Treasury anticipates announcing gradual adjustments to its nominal coupon and 2-year FRN auction sizes at the February 2018 refunding.  The magnitude and allocation of increases to auction sizes will depend in part on projections for the fiscal outlook, as well as feedback from market participants.

 

Based on current fiscal forecasts and internal Treasury modeling, it is anticipated that these changes will likely result in a stabilization of the weighted average maturity (WAM) of debt outstanding at or around the current levels, with the caveat that unexpected large changes in borrowing needs could have an unforeseen impact on future issuance and ultimately the level of WAM.  Any adjustments will be made in a manner consistent with our practice of being regular and predictable.

The take home for the market, however is that the TSY punted on the decision for rising auction sizes, saying it plans to address changes in any seasonal borrowing needs over the next quarter through changes in regular bill auction sizes and/or cash management bills.

As Bloomberg details, the Treasury said given Fed balance sheet unwinding plans, it “anticipates announcing gradual adjustments to its nominal coupon and 2-year FRN auction sizes at the February 2018 refunding.” These changes are anticipated to result in “a stabilization” of the weighted average maturity of debt outstanding at or around the current levels; while unexpected large changes in borrowing needs could have an “unforeseen impact on future issuance ultimately.”

The TBAC minutes also signaled an increased issuance in 2-, 3-, 5-year sector “is attractive” and added that extraordinary measures will allow the government to continue to meets its payment obligations through January 2018,

The Treasury concluded that “it is currently too early to provide a more precise forecast as to how long the extraordinary measures will last” and, perhaps most importantly, the Treasury did not comment on study of issuing ultra-long bonds in quarterly refunding statement.

And an interesting note at the end of the TBAC minutes:

Treasury believes that it is prudent to regularly test its contingency auction infrastructure.  Treasury’s contingency auction system has been used routinely over the last several years to conduct mock auctions.  Within the next quarter, Treasury intends to conduct a small-value test auction using its contingency auction system. More details about this small-value auction test will be announced at a later date. This small-value auction should not be viewed by market participants as a precursor or signal of any pending policy changes regarding Treasury’s existing auction processes.

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Israel, US call on EU to declare Hezbollah a terrorist organisation

November 1, 2017 Middle East Monitor 0

Israel’s Yesh Atid party leader, Yair Lapid and US Congressman, Ted Deutch have called on the European Union to declare Hezbollah a “terrorist organisation”. In a joint statement published in Spain’s La Sierra newspaper and Italian Corriere Della Sera newspaper yesterday, the officials described Hezbollah as “the most horrifying terrorist organisation”. The two called on the European countries to cancel what they called “false distinction” between the political and military arms of Hezbollah, and to declare the whole organisation a terrorist group. “This distinction is false and has no credibility,” Deutch said, adding that whoever believes that “declaring Hezbollah a terrorist organisation will make it difficult to provide assistance to Lebanon is mistaken”. “Look at Gaza Strip, for example. Hamas is classified as a […]

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Is Blockchain Ushering in a New Era of Deal-Making?

November 1, 2017 financedude85 0


In the ever-expanding modern global economy, international deal-making is an integral part of trading, investments, and exchanging value across national borders. Dealings on a domestic platform are easier to conduct, where contract-driven activities can be verified in person and more reliably, without leaving much room for fraudulent activity or valuable information to be compromised.


For international economic ventures to proceed, contracts must be signed and managed remotely. This may prove to be a dubious notion when operating with the help of today’s array of unstandardized and haphazard online circuits, which can often prove inauthentic and put either or both parties at risk. Signatures can be superimposed illegally, data can be stolen, and the overall sanctity and confidentiality of the contract violated, not to mention the harried process of maintaining these relationships. For these issues and more, blockchain is increasingly considered a fitting solution.


The Status Quo is Stuck

One will encounter several counterintuitive digital infrastructures online when attempting to locate desirable personnel and contractors. These include posting advertisements in local forums or websites like Craigslist. There are often delays in delivery with little accountability, and few records to prove the reliability of applicants.


Foreign exchange regulations often hinder the flow of broader online dealings as well, and can put significant roadblocks in the timely completion of a contract. Often the wait for a payment to be processed lasts for days, and the banks involved on either side may unduly halt payment processing, owing to rigid governmental mandates. Platforms like Upwork, Freelancer, and PayPal impose draconian rules on contractors and vendors, requiring minimum deposits and taking absurd fees. Dispute settlements on these platforms can lead to sizable monetary losses for either party involved and are often drawn out, crippling smaller businesses who suffer from greater exposure to cash flow volatility.


Start-ups and other smaller businesses also use content management systems and other traditional platforms like email to maintain contracts with their clients and employees, make economic transactions, and guide personnel. These carry the risk of hacking, levy fees, and insist upon a level of maintenance that adds to overhead. Keeping these hindrances in mind, it is evident that one needs a more autonomous solution for smoother dealings across the world: a medium that will help overcome the hiccups and larger shortcomings and guarantee security for all involved.


How Blockchain Can Help

Blockchain is a distributed ledger that decentralizes deals in a way that encourages transparency and autonomy, without the threat of hacks or hefty fees. Professionals and businesses across numerous fields of work will soon be able to transact via platforms like Confideal, which put a familiar interface on the once-complicated process of creating smart contracts. These blockchain-based agreements allow two parties to exchange value based on a set of conditions, and blockchain can automate their operation without oversight because of its data irrefutability.


There is no longer an advantage in hiring an intermediary to enforce proper conduct in business relationships. A Confideal blogpost explains that prior to the mass adoption of smart contracts, their legal status needs to be assessed in order to choose the appropriate smart contract model suitable for a particular jurisdiction. “To put it simply, code is not law, but smart contracts created on a platform enabling the execution of said contracts and dispute resolution may be one.”


There is greater transparency in conducting dealings through blockchain technology. The permanent ledgers in a blockchain environment require transactions to be permanently recorded, and the cryptographic standards in use make it impossible for third parties to hack or compromise deals. Data tampering is impossible because of the strict node consensus rules required to alter blockchain entries, and every transaction is easily trackable, complete with validated digital signatures that keep everyone accountable.


As blockchain is a decentralized solution, it naturally eliminates the role of middlemen in helping recruit service-providers and removes the risk of costly mediation. It also drastically reduces the time spent in looking for potential clients and employees. Dealings can be done directly between participants, creating a truly free market exempt of mediating parties. Forex regulations are also irrelevant, and stringent government oversight of economic deals can be bypassed, which helps boost smaller businesses.


Concerning contract arbitration, an unfortunate necessity in some cases, the two parties involved must rope in an external third-party arbitrator one who is objectively unaware of the terms of the smart contract and its details. Smart contract platforms can provide a rating system for arbitrators so that clients can effectively choose arbitrators of superior quality. Platforms such as Confideal give parties equal footing when negotiating and arbitrating, removing asymmetric dynamics and ensuring the most optimal outcome in any situation for both signees.


The New Deal

What will the future of online dealings look like? An e-commerce store will be able to easily set up smart contracts with its vendors to automatically withdraw cryptocurrency, fulfill inventory, or onboard new products. Arbitrators with experience can specify their skills and services (including language preferences, experience, and other personal markers) so that the store can find them if necessary. Even finding outlier skills will be simple, like hiring a Korean-speaking arbitrator with knowledge of real estate laws in Florida, USA.


By helping contracting parties to save considerable time and money, and avail of higher efficiency in such transactions, blockchain will further empower individuals and businesses (small and large alike) to gain greater control over the exchange of products and services, with the ease and security of negotiating face to face.

                                                    

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Invest In Gold To Defend Against Bail-ins

November 1, 2017 GoldCore 0

Invest In Gold To Defend Against Bail-ins

 – Italy’s Veneto banking meltdown destroyed 200,000 savers and 40,000 businesses
– EU bail-in rules have wiped out billions for savers and and businesses, with more at risk 
– Bail-ins are not unique to Italy, all Western savers are at risk of seeing savings disappear
–  Counterparty-free, physical gold bullion is best defence against bail-ins

One of Italy’s twenty regions is calling for more autonomy from the state following a nonbonding referendum. Why? Because a government supported ‘rescue package’ caused the lifesavings of 200,000 savers to be wiped out during the  implosions of Popolare di Vicenza and Veneto Banca.

Since then the banks have been rescued in one way or another yet the impact of the collapse on individuals and small businesses is only just becoming clear.

As in Spain’s Catalonia the region of Veneto is wealthier than the average Italian region, with its own industries and language yet it has been left with a pile of ash when it comes to its banking sector.

The region is proud to be the home of successful brands such as Benetton, De’Longhi, Geox and Luxottica. But it is the 40,000 small businesses that are in a state of limbo unable to pay workers, find credit or operate on a day-to-day basis.

Sadly the case of Veneto is one of a growing list of regions of banking customers that have been destroyed due to the incompetence of national authorities and the overbearing powers of the EU.

Profitable businesses take the hit

What is seen is as surprising to many reading about the story of Veneto is that profitable, stable businesses are also suffering as a result of a banking collapse.

When someone’s savings are wiped out, that isn’t the end of the nightmare. Many businesses were exposed to those banks both through credit and shares.

Many businesses operate on credit. This happens in companies of all scales and levels of success. The businesses that borrowed from the two Veneto banks are now in a state of limbo. They have no line of credit due to their exposure to the collapsed banks.

This is despite a government-led body stepping into help manage the fallout and finances of the ruined institutions. Bloomberg explains:

Even a perfect credit score is useless in Veneto now if your only collateral is stock in either bank, which were coveted investments for generations of locals.

Bail-in of the first resort 

Italians are in very deep financially when it comes to their banking system. The 2015 IMF report states:

Retail holdings in Italy are relatively large compared to other countries, comprising about one- third of about €600 billion worth of bank bonds and half of about €60 billion worth of subordinated bonds.

That is all money that will just disappear overnight in the case of bank failure. In some cases, it already has.

In Italy a common problem has been that savers and businesses were persuaded to invest in subordinated (junior) bonds by their bank managers.

By 2015 over €31 billion of retail sub bonds had been sold to retail investors. Retail investors are ordinary savers and small businesses.

‘Households hold about one-third of senior bank debt and almost half of total subordinated bank debt.’ – IMF

These bondholders are seen as creditors. The same type of creditor that EU rules state must take responsibility for a bank’s financial failure, rather than the taxpayer. This is a bail-in scenario.

In a bail-in scenario the type of junior bonds held by the retail investors in the street is the first to take the hit. When the world’s oldest bank Monte dei Paschi di Siena collapsed ordinary people (who also happen to be taxpayers) owned €5 billion ($5.5 billion) of subordinated debt. It vanished.

A 2015 IMF study found that the majority of Italy’s 15 largest banks a bank rescue would ‘imply bail-in of retail investors of subordinated debt’. Only two-thirds of potential bail-ins would affect senior bond-holders.

Nothing will respect you like gold does

Why put so much faith in the bank? Because, despite many financial crises in the last 100 years, savers and businesses still believe their money will be safe.

The graph above shows just how much we still trust our banks. The least trusting country is Italy yet their exposure has been so great, imagine what damage will be done when the likes of the UK, US or Germany face a bail-in situation.

In Italy where banks have been around for literally hundreds of years, many family business owners are still dealing with bank accounts, investments and loans their ancestors organised a century ago.

This kind of relationship can lead to an almost Stockholm Syndrome situation. Despite receiving consistency bad treatment from your bank you want to support it and help it out. You still trust it. So when the bank suggests you hold shares then you take their advice.

“We jealously guarded those shares like you would gold bars,” A 60 year old baker told Bloomberg, “Buying your bank’s stock was the traditional thing to do. We got it badly wrong.”

Of course what everyone forgets is that banks are not there to look after you. They are there to make money. They do this almost instantly the second you deposit funds, it’s their money. The second you take out a loan, they own you. The second you buy shares, they have a license to be reckless.

Naively treating anything other than gold like gold is the first step in financial mismanagement. Nothing is like physical, allocated and segregated gold. For a start it is all yours.

Is your government or the EU there for you? Don’t bet on it 

A bail-in forces creditors of a bank to shoulder losses when the firm fails. The term covers cover every case of creditor loss-sharing when a bank goes belly-up.

This is different to events we saw during the 2008 financial crisis when taxpayers tended to bail-out banks. Since 2016 European Union rules have stated there must be a bail-in before a government bailout is allowed.

Governments would clearly like to prevent savings of hardworking individuals and businesses from being wiped out. However they are fearful of the EU, trying to skirt their bail-in rules would no doubt sour relations with a body that is keen to stick to rules it only recently passed.

There is a conflict of interest it seems between pleasing the EU and doing the right thing by voters.

Given Brexit and now Catalonia the EU is unlikely to be in the mood to bend its rules for another troublesome country. This is despite it costing the EU’s own citizens billions of euros in lost savings and investments.

This is a risk for the EU, especially in Italy where there is already strong anti-EU sentiment. The case of Veneto, where 75% require more power and 15% would like to see total autonomous rule is another Catalonia again. A further sign of increased populism thanks to an overbearing and indifferent EU.

Invest in gold, or prepare to fail

Depositors and investors should be aware of their country’s requirements when it comes to keeping their money safe in the banks. Whilst bail-ins will at present only hurt those who hold deposits above EUR 100,000, there is little stopping the protected amount being decreased, or ignored altogether.

 

For those living in the EU, the European Commission has forced all 28 countries to implement bail-in legislation. This means depositors must be more vigilant than ever about the health of a particular bank, and the risk exposure of their portfolio.  This means diversifying your invesments and decreasing the level of counterparty exposure.

One area of portfolio diversification that is growing due to concerns over the safety of bank accounts, is gold investment which saw a 15% climb in Q2 of 2016. Europe, in 2015, showed the largest regional demand for gold bars and coins (an increase of 12% year on year).

Unallocated gold is as much at risk as any other asset exposed to counterparties. Savers and businesses can protect their wealth by investing in allocated gold, in segregated accounts. This gives your outright legal ownership. There are no counterparties who can pop along after going bust and take what is legally theirs. It cannot be made to disappear overnight.

Gold is the financial insurance against bail-ins, political mismanagement and overreaching government bodies.

 

Read our guide on how to protect yourself from bail-ins here

News and Commentary

Gold logs a 1.1% monthly loss in October (MarketWatch.com)

Gold falls as dollar recovers, Fed chair in focus (Reuters.com)

Small Caps Lead U.S. Stocks Higher as Dollar Gains (Bloomberg.com`)

Consumer confidence climbs to a nearly 17-year high in October (MarketWatch.com)

CME to launch bitcoin futures in fourth quarter subject to approvals (Reuters.com)

Credit: Wall Street Journal

Gold vs. Bitcoin: Goldman Sachs Weighs In (DailyReckoning.com)

Why Is Bitcoin a Big Deal? (CharlesHughSmith)

One Misstep Now Would Cost the Bank of England Its Credibility (Bloomberg.com)

Britain accelerates Brexit plans, divorce talks also to speed up (Reuters.com)

China has grand ambitions to dethrone the dollar. It may make a powerful move this year (CNBC.com)

Gold Prices (LBMA AM)

01 Nov: USD 1,279.25, GBP 961.48 & EUR 1,099.52 per ounce
31 Oct: USD 1,274.40, GBP 964.21 & EUR 1,095.60 per ounce
30 Oct: USD 1,272.75, GBP 966.91 & EUR 1,093.80 per ounce
27 Oct: USD 1,267.80, GBP 968.35 & EUR 1,090.18 per ounce
26 Oct: USD 1,278.00, GBP 968.34 & EUR 1,082.34 per ounce
25 Oct: USD 1,273.00, GBP 964.81 & EUR 1,081.67 per ounce

Silver Prices (LBMA)

01 Nov: USD 16.94, GBP 12.74 & EUR 14.55 per ounce
31 Oct: USD 16.82, GBP 12.72 & EUR 14.45 per ounce
30 Oct: USD 16.74, GBP 12.69 & EUR 14.39 per ounce
27 Oct: USD 16.72, GBP 12.76 & EUR 14.38 per ounce
26 Oct: USD 16.97, GBP 12.84 & EUR 14.37 per ounce
25 Oct: USD 16.89, GBP 12.75 & EUR 14.34 per ounce


Recent Market Updates

– Stumbling UK Economy Shows Importance of Gold
– Wozniak and Thiel Fuel Bitcoin-Gold Debate: Gold Comes Out On Top
– Russia Buys 34 Tonnes Of Gold In September
– Gold Will Be Safe Haven Again In Looming EU Crisis
– Gold Is Valuable Due to “Extreme Rarity” – Must See CNN Video
– Gold Is Better Store of Value Than Bitcoin – Goldman Sachs
– Next Wall Street Crash Looms? Lessons On Anniversary Of 1987 Crash
– Key Charts: Gold is Cheap and US Recession May Be Closer Than Think
– Gold Up 74% Since Last Market Peak 10 Years Ago
– How Gold Bullion Protects From Conflict And War
– Silver Bullion Prices Set to Soar
– Brexit UK Vulnerable As Gold Bar Exports Distort UK Trade Figures
– Puerto Rico Without Electricity, Wifi, ATMs Shows Importance of Cash, Gold and Silver

 

Important Guides

For your perusal, below are our most popular guides in 2017:

Essential Guide To Storing Gold In Switzerland

Essential Guide To Storing Gold In Singapore

Essential Guide to Tax Free Gold Sovereigns (UK)

Please share our research with family, friends and colleagues who you think would benefit from being informed by it.

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Bitcoin Surges To New Record High $6600 On Futures Hope & Fork Dividends

November 1, 2017 Tyler Durden 0

Amid hopes for more mainstream adoption, thanks to CME launching Bitcoin futures, and expectations of another ‘fork dividend’ as the SegWitzx software update looms, Bitcoin prices have soared above $6600 this morning

It appears traders are rotating out of other cryptos into Bitcoin once again…

Sending Bitcoin above $108 billion market cap and over $6600…

 

Mati Greenspan, an analyst with trading platform eToro, said on Wednesday about CME launching Bitcoin Futures…

“Not only is this a monumental testament to the belief in bitcoin and the demand in the market but it will also boost the liquidity by opening the market to many more interested players.”

There is also speculation that this most recent surge is being driven by another upcoming “fork” in bitcoin’s underlying software. The SegWit2x software update is scheduled for November 16 and could split bitcoin in two, creating a new currency.

This has happened in the past with Bitcoin Cash and Bitcoin Gold, and in those cases, bitcoin holders got those new coins for free.

As a result, investors may be piling into bitcoin in the hopes of a SegWit2x dividend.

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