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Draft Bank Rescue Law Would Not Shield Big Deposits - (www.cnbc.com) A draft law that a group of European Union
lawmakers voted for on Monday would shield small depositors from losing their
savings in future bank rescues, but customers with more than 100,000 euros in
savings when a bank failed could suffer losses. A group of lawmakers in the
European Parliament's economics committee overwhelmingly voted that, from 2016,
large depositors in the EU might suffer
losses if a bank gets into serious trouble. The plan was similar to a deal in
Cyprus, where wealthy depositors at two banks took hits to save the country
from bankruptcy. Under the EU proposal, a bank would dip into large deposits of
over 100,000 euros once it had exhausted other avenues such as shareholders and
bondholders. But deposits under 100,000 euros would be spared. "The case
in Cyprus showed how important it is to have clear procedures for making
shareholders, bondholders and ultimately depositors foot the bill," a
press release from the committee said after the vote.
Washington
Signals Deep Dollar Concerns -- Paul Craig Roberts - (www.paulcraigroberts.org) Over the past month there has
been a statistically improbable concurrence of events that can only be
explained as a conspiracy to protect the dollar from the Federal Reserve’s
policy of Quantitative Easing (QE). Quantitative Easing is the term given to
the Federal Reserve’s policy of printing 1,000 billion new dollars annually in
order to finance the US budget deficit by purchasing US Treasury bonds and to
keep the prices high of debt-related derivatives on the “banks too big to fail”
(BTBF) balance sheets by purchasing mortgage-backed derivatives. Without QE,
interest rates would be much higher, and values on the banks’ balance sheets
would be much lower. Quantitative Easing has been underway since December 2008.
During these 54 months, the Federal Reserve has created several trillion new
dollars with which the Fed has monetized the same amount of debt. One result of
this policy is that most real US interest rates are negative. Another result is
that the supply of dollars has outstripped the world’s demand for dollars. These
two results are the reason that the Federal Reserve’s policy of printing money
with which to purchase Treasury bonds and mortgage backed derivatives threatens
the dollar’s exchange value and, thus, the dollar’s role as world reserve
currency.
Dudley
Says He Can’t Be Sure If Next QE Move Is ‘Up or Down’ - (www.bloomberg.com) Federal Reserve Bank of New
York President William C. Dudley said he has not decided
whether the Fed’s next move should be to enlarge or shrink its bond buying
program as he called for a fresh look at its eventual retreat from record asset
purchases. “Because the outlook is uncertain, I cannot be sure which way -- up
or down -- the next change will be,” Dudley said in a speech today in New York.
Dudley adds his voice to a debate on the Federal Open Market Committee about
what to do with its program of bond purchases, designed to lower the 7.5
percent unemployment rate. While many Fed officials have voiced support for
shrinking purchases as the next step, Dudley, who is also vice chairman of the
FOMC, signaled willingness to increase purchases. Officials last week expressed
a range of views on the program. Philadelphia Fed President Charles
Plosser called for shrinking purchases at the Fed’s next
meeting; San Francisco’s John
Williams favored a reduction “perhaps as early as this summer.”
By contrast, Boston’s Eric
Rosengren said low inflation and high unemployment suggest there
may be a need for even more stimulus, not less.
Japanese
Bonds Fall for Second Day After Demand Ebbs at Auction - (www.bloomberg.com) Japanese bonds fell for a
second day, with yields set for their highest close in almost a year, as demand
waned at a 40-year debt auction today. Investors at the 399.9 billion yen ($3.9
billion) sale bid for 2.64
times the amount of debt offered, the lowest level since August 2011. The bonds
sold at a 1.955 percent yield. Traders expected 1.93 percent, based on a
Bloomberg News survey. “Some people had expected higher yields to draw demand
from investors and thus a better auction result,” said Akito
Fukunaga, the chief rates strategist in Tokyo at
Royal Bank of Scotland Group Plc’s RBS Securities unit, one of the 24 primary
dealers that underwrite the government debt. “Bad auction results” drove the
market down, he said.
Death cross brewing in the bond market - (www.money.cnn.com) Investors have been dumping
bonds lately, but a little-known technical indicator suggests that may not last
for long. The 10-year yield is flirting with the
so-called death cross, which occurs when its 50-day moving average falls below
its 200-day moving average. The short-term average has been moving lower and
the long-term average has been creeping up over the past few weeks as yields move
higher. On Friday, the 50 day moving average was 1.82%, compared with 1.78% for
the 200 day moving average. If history is any guide, hitting the death cross
could lead to more bond buying, a sharp drop in yields and a correction in
stock prices, according to Abigail Doolittle, a technical analyst at The
Seaport Group.
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