Regarding Europe and the ECB's emergency purchase plan (PEPP), Roger is still saying that the capital key is no longer applicable. This is really a misunderstanding.! What has been lifted is the Issuer limit per country. This was done so that purchases under the PEP plan can still be done under the capital key! In order to buy more Italian government bonds, the ECB PEPP programme needs to buy more German Bunds. As they were getting very close to the 33% issuer limit, the market assumed that therefore the PEP programme could not buy many more bunds, thus also not many more BTPs. By removing the issuer limit, this doubt is now taken away. The implications of this decision are twofold: 1) It was assumed that the PEPP, which in theory could buy Government debt, corporate debt, covered bonds and ABS (under those respective purchase programmes) would be limited in amount for sovereign debt (PSPP) and that corporate bonds would be main beneficiary under PEPP. Now that the issuer limit is revoked (for Public Sector Purchases under PEPP purchases only), the focus is on buying more government debt and thus less corporate debt 2) In any future debt restructuring, the ECB's (or Bank of Italy's) holdings of BTPs cannot vote in favour of a debt swap or change in coupon (disenfranchise clauses), thus blocking restructuring of the specific bonds where the limit is breached or will be excluded from voting. This can be overcome by designating those held bonds with a different ISIN (like was done with the Greek debt restructuring). However, this thus leads to a higher loss given default for the remaining (private) debt holders. This risk is explicitly recognised and addressed by the ECB in the publication of their decision, as they explicitly state their pari pass treatment, not pari passu "ranking" only. I would like to draw you attention to paragraph 5 & 6 as well as paragraph 9 (pari passu) https://www.ecb.europa.eu/ecb/legal/pdf/celex_32020d0440_en_txt.pdf

Fantastic commentaries- well done and thank you. Learnt a lot about the volatility rule book and how it plays to any further leg downs!

Test

Is the deleveraging of the market-makers Raoul was talking about really over, or not yet? How will we know?

I love everyone at RV, but Roger is always particularly great.

those eyebags get bigger every day :D the daily dose RV helps me get through this, thanks guys!!

Great stuff Ed / Roger, this definitely adds an enormous benefit to RVTV subscription :)

Love this- Do you have the slide of the us steepness of curve compared to italy? That is helpful

I love this thank you

you guys are awesome!

Ash, I appreciate your having a clock sitting on the mantle behind you. It adds a little context vis-a-vis the time of your recording.

Another great daily update. Keep it coming. And Ed finally fixed his wifi connection issue! Awesome!! :)

$2.2 trillion is 10% of GDP. So you are correct, just filling a hole. Don't see how it will be a stimulus either. And some of it is in the form of loans, so the debt will be a drag on future growth.

Good conversation on VIX and volatility. Trying to get a handle on what these risk parity/hedge funds do relating to volatility is helpful in understanding market movements.

Thank you for these updates. I greatly appreciate them.

By the time you read this comment, my UUP holdings will be worth 20% less. Just kidding guys, I had to.

Are we out of the woods, why is market going up even with bad news, and situation on Covid 19 cases still rising in US

In the English case of a small business paying 12% plus using personal assets as collateral, I think we will have thousands of voluntary bankruptcies just like walking away from your mortgage in the housing crisis. This will happen in the US and the rest of the world. Most of these will be small businesses, but a world of small businesses makes up a lot of money. At least they will be starting out at ground zero. They will be able to get a loan somewhere under 12% in a deflationary economy. Investors keep buying Argentina bonds. Cash is king. Be safe. DLS

If this is a bear market rally that ends in retesting the bottom, margin calls will come into play again. We may not be out of the liquidity/deleverage market yet. DLS

These conversations are top class. Very much appreciated.Thanks guys.

Ed and Roger, Great job on these videos! I'd love to hear a little more on the high yield market and the timing for potential defaults. It just takes one good size default to set of the market

I feel like the futures turned when Powell said he would never run out of ammo (not going to comment on that), but I don't think the unemployment really spurred the turnaround. That said, love the content and daily briefings, keep it comin gentlemen.

Excellent. Keep doing this. Super insightful!

Ed, do you have a sense of the likely timing of the upswing in demand for dollars?

Great discussion! The Ed/Roger colloquy on the future of the USD is the key. The Johnson "Milkshake Theory" is intriguing but so is Roy Sebag's (Goldmoney) argument: https://www.goldmoney.com/research/goldmoney-insights/milkshakes-sugar-highs-and-gold-a-response-to-brent-johnson-s-milkshake-theory.

Thank you, this market is fucking insane

Great job guys! Do you think the balancing runs heavier on the last couple sessions of the month or do more funds try and balance closer to realtime?

Sounds like Raoul and Brent’s Dollar rally may well still be in play, just in the second “real economy” phase. The EM wrecking ball is out of sight but might, unfortunately, still be just off stage. Another great job Ed and Roger. You guys always seem so prepared, targeted (that’s that RV curation magic), articulate and crisp in your delivery. These Daily Updates are something to behold and quite welcomed.

Spectacular!

The more Withnail quotes the better.

“these numbers will be higher by the time you’re watching this.”...if i had a nickel for every time i’ve heard

Brilliant stuff. Thank you guys.