Georgi Stankov, January 30, 2016
Forget the stock markets this week, the big news is that the corporate junk bond bubble and the governmental bond bubble have imploded and they are many times bigger than the equity bubble. We have ended up again where we started five months ago – with the bursting of the four apocalyptic bubbles.
Stocks started off the year with the worst drop in their history. And this is just the beginning. This week we witnessed the final respite before exitus. However, while stocks grab the headlines, it is the bond markets that warrant the most attention. Why? Because of its size. The corporate bond bubble is $100 trillion in size. To put this into perspective, the Tech Bubble, the single largest stock bubble in history relative to profits, that burst in 2000 and crashed the markets in 20o3/2004 was just $16 trillion in size. I have given you the history of the German Tech Index that died after it dropped more than 95% and helped the dark cabal steal over 400 billion euro from the German savers.
Beyond this, there are $555 trillion derivatives out of more than $900 trillion total derivatives market that are based on interest rates (bond yields). So that $100 trillion in corporate bonds is leveraged by an additional five to one.
In simple terms, as much as the MSM focus on stocks, the corporate bond bubble is a much larger, more pressing problem that will break the cabal’s neck. Especially since it has begun to burst last year and has precipitated this year. Junk bonds were the first “shoe to drop.” They’ve taken out their post-2009 bull market trendline (blue line) as well as critical support (green line):
Although Bloomberg and the other cabal MSM now claim that this is primarily an issue for Oil Shale companies, they are amply wrong. The defaults are coming across the board with energy companies accounting for less than 33% of all defaults. This is a consequence of the Greatest Depression of all time and the implosion of the junk bond bubble has already triggered the global debt bomb.
The next shoe to drop is the Emerging Market Corporate Bonds. Emerging Market corporations have over $3 trillion in excess debts according to the IMF. This is likely a conservative estimate. Globally the US Dollar carry-over trade is more than $9 trillion. Emerging Market corporations were issuing US Dollar denominated debt at a staggering pace since 2009. The asphyxiation of the US dollar at its present “wuthering heights” is the result of the unwinding of this carry-over trade that is about to decimate dozens of big hedge funds in the coming days.
Junk bonds were the first to implode, emerging market corporate bonds were the next, followed by municipal bonds (see Puerto Rico) and now comes the sovereign bonds bubble. And this implosion of the four apocalyptic bubbles is happening with a lightening speed, much quicker than the crash of the stock bubble that was mended this week again by rigged electronic trading. However this time without the dark cabal being able to conceal this fact. Which shows how the whole system is totally collapsing in these days of massive energetic transformation.
This morning, the BOJ’s announcement of negative rates promptly pulled all treasury yields around the globe lower. This led to the simple question: “How big the global negative rate sovereign bond bubble will grow from now on? Promptly thereafter the FT was kind enough to do the math: the answer – a record $5.5 trilion in government bonds are now trading at negative yields.
This means that about one quarter of all global bondholders of sovereign debt will end up paying their government custodians for the pleasure of parking their cash in the “safety” of government bonds. The FT adds that “fears for economic deterioration and increasingly abnormal policies adopted by global central banks to ward off the threat of deflation have resulted in a bizarre scenario in which investors pay governments to hold their money.”:
“Figures from JPMorgan show that negative rates, once considered only theoretically possible, now account for one quarter of the index for government bonds.
On Friday, yields on Japanese, French and German bonds hit record lows after the Bank of Japan decided to adopt negative interest rates, just over one week after governor Haruhiko Kuroda ruled the policy out.
In Europe, the first region to adopt negative interest rates, around half of all government bonds carry sub-zero yields, led by Germany, Finland and Switzerland, where negative yields extend all the way to bonds with 10 year maturity.”
The chart below demonstrates how unprecedented today’s bond situation is: as of this morning at least 13 countries had 2Y yields that were negative, and 10 nations could boast with negative rates all the way to the 5 Year mark:
To complete the picture, the WSJ has just confirmed that over a fifth of global gross domestic product, or 23.1%, will now be produced in countries that have negative interest rates, noting that the ECB and BOJ together are responsible for around 21% of global GDP. Swiss, Swedish and Danish GDP add up to less than 2.5% of the global total.
The negative interest rates in most western economies expose the desperation of the central banks that have lost control over the financial situation. This could not be concealed even by the most hawkish and fraudulent MSM of the dark cabal. After the total desperation comes the surrender of the banksters’ cabal and then the final irreversible collapse of their Orion-Ponzi scheme:
Never before have so many central banks explored negative interest rates territory at the same time and thus eliminating the last safe haven where banks can deposit their money as to gain modest secure returns. The entire Orion monetary system is in a state of total implosion and this will become evident in February and March. That is why forget the stock markets this week – they will not survive this financial implosion of gargantuan proportions.