Friday, May 30, 2014

UK Citibank USD Current Account Continues Ramping Up Fees

Once upon a time the Citibank USD current account was by far one of the best such accounts on the market for depositing USD cheque's in the UK, where typically 1.75% was added to the spot GBP exchange rate and if lucky at best as little as 1.5% or at worst rarely more than about 2.2% with no other fees as long as £2,000 or equivalent was always kept on deposit.
However, things started to change a couple of years ago when Citibank introduced a £5 ($8) charge per cheque deposited the immediate effect was to make deposits of small amounts unviable. For instance this fee translated into an additional cost of 0.8% on a $1k cheque deposit the effect of which was an increase of charges experienced to a range of 2.3% to 3.05% per USD cheque. Which when compared against competitors at the time was still was deemed to be a good deal.
If Citibank had stayed put at that than Citibank would still have remained one of the best USD current accounts on the market as the great advantage is that Citibank customers get to choose online when to make the currency transfer and therefore can better time transfers rather than to be left at the mercy of banks that effectively tend to CHOOSE the WORST rate over a 2 week period.
So despite the minimum transfer fee slowly creeping up to 2% to 3% (plus £5 fee), the ability to select rates offered customers a significant advantage over customers of other banks.
However lately, following the most recent Citibank changes the spread has now apparently jumped substantially to a minimum of 3% and as high as 4% with a typical rate offered of 3.6% for a $2k transfer (4.6% for less than $2k). Therefore more than twice the rate citibank used to typically charge a couple of years ago.
For instance the following table illustrates the actual citibank rates given this week on rate tests today and yesterday.
OfferedSpot% Added

Up until 2 weeks ago the typical % added was 2.34%, that now for no apparent reason has been increased by near 1.3%.
The below table better illustrates the effect of the change in charges over the past few years on typical dollar cheque deposit amounts.
2011 FeeMay 2014 Fee

So today a $5000 USD cheque deposit carries more than twice the fee charged in 2011 and a far greater % for smaller amounts.
Citi UK Reference Exchange Rate
Citibank exchange rates are hidden away on the website under the Investment & Deposits / FX Buy and Sell menu tab when logged in.
The table illustrates the huge GBP spread between buying and selling of 7.65%, more than twice what it used to be a couple of years ago.
The bottom line is that many Citibank USD cheque deposit customers will be wasting their time trying to transfer at a decent rate that is for instance 2.3% above the spot rate but the reality that they now face is that they will be lucky to obtain a rate of spot +3%, and more likely be lumbered with spot+3.6% that is in addition to the £5/$8 cheque deposit fee.
Time to start looking to a better alternative to Citibank USD banking.

Tuesday, May 27, 2014

First Cisco And Microsoft, Now IBM: China Orders Banks To Remove High-End IBM Servers

A week ago, in retaliation to the inane charges lobbed by the US accusing 5 Chinese army officials of spying on US companies (when the NSA spying scandal on, well, everyone refuses to leave the front pages), China announced it would ban the use of Windows 8 on government computers (considering the quality of Windows 8, this is likely a decision government computers would have taken on their own regardless). Today, China has expanded its list of sanctioned companies from Microsoft to include IBM as well, following a Bloomberg report that the Chinese government is pushing domestic banks to "remove high-end servers made by International Business Machines Corp. and replace them with a local brand."
Why is MSFT and now IBM sowing the seeds of the US government's stupidity and failed attempts to distract from its own spying scandals? We don't know. Here is what we do know:
Government agencies, including the People’s Bank of China and the Ministry of Finance, are reviewing whether Chinese commercial banks’ reliance on IBM servers compromises the country’s financial security, said the four people, who asked not to be identified because the review hasn’t been made public.

The review fits a broader pattern of retaliation after American prosecutors indicted five Chinese military officers for allegedly hacking into the computers of U.S. companies and stealing secrets. Last week, China’s government said it will vet technology companies operating in the country, while the Financial Times reported May 25 that China ordered state-owned companies to cut ties with U.S. consulting firms.

Harriet Ip, a Singapore-based spokeswoman for IBM, referred questions to IBM in the U.S. Jeffrey Cross, a Somers, New York-based spokesman, didn’t immediately respond to an e-mail seeking comment outside U.S. business hours.

“Security trumps everything,” said Duncan Clark, chairman of BDA China Ltd., a Beijing-based consultant to technology companies. “China doesn’t need the U.S. companies in the way it did for the last few decades.”
Perhaps somewhat ironically, IBM sold its low-end server business to Lenovo, itself a part of IBM once upon a time, several months ago for $2.3 billion.
But if this wasn't enough of an insult to IBM's top line, here is another concern about IBM margins: China simply believes Big Blue's products are too expensive:
In addition to concern about Armonk, New York-based IBM’s equipment as a security threat, China’s government also believes IBM servers are more expensive in China than in other regions, the people said.

China Postal Savings Bank Co. is using servers made by Jinan-based Inspur Group Ltd. as part of a trial program that began in March 2013, the people said. The government plans to expand that trial to other banks, they said. The group’s Inspur International Ltd. unit gained 10 percent to HK$1.53 at 2:57 p.m. in Hong Kong trading today. In Shenzhen, Inspur Electronic Information Industry Co. rose 4.7 percent.
That's ok though: since news and fundamentals don't matter, we fully expect IBM stock to also be up several percent on what now appears to be the terminal loss of one of the company's largest export markets. And not only IBM: other stocks set to surge on this bad news are MSFT and, of course, Cisco, whose CEO was recently crying about Obama's NSA policies, and whose sales in China are once again assured to crater. But as they say in the movies: tis but a scratch - who needs top line growth when a company can issue debt to buy back its share and pretend all is well?

Tuesday, May 13, 2014


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Monday, May 12, 2014

Switzlerand: referendum may herald world's highest minimum wage

Swiss business leaders shocked by past popular votes on executive pay and immigration are wary of a referendum on 18 May that could see Switzerland adopt the world's highest minimum wage of 22 Swiss francs (£14.70) an hour.

A recent opinion poll by gfs.bern found that 64% of voters were against the proposal, made by the SGB union and supported by the Socialist and Green parties. But Switzerland's system of direct democracy, with frequent popular votes on social, political or economic matters, has brought surprises before: the Swiss unexpectedly voted in February to curb EU immigration.

"I'm feeling uneasy about the upcoming vote," said Ralph Mueller, division head at electronic components maker Schurter.

"We would have to significantly raise the salaries in our factory in Mendrisio, where about 80 of our 100 workers commute from Italy, but we would also have to raise the wages of our higher-paid staff. It would cost about 250,000 francs [£167,000] a year."

Swiss voters overwhelmingly rejected a proposal in November to cap the salaries of top executives at 12 times that of their company's lowest earner, but they did back a plan last year to give company shareholders the final say on pay and incentives.

The state secretariat for economic affairs (Seco) said the proposed minimum wage of 22 Swiss francs an hour would be the world's highest, even when adjusted for purchasing power in the notoriously expensive country.

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Sunday, May 11, 2014

Japan Debt Update: ¥1,020,000,000,000,000.00

It's been a while since we looked at Japan's debt situation. Here is the dire update.
From Japan News:
Japan’s national debt totaled a record-high ¥1.02 quadrillion as of the end of March, up ¥33.36 trillion from a year earlier, the Finance Ministry said.

The central government debt, which increased ¥7.01 trillion from the end of December last year,kept rising mainly due to ballooning social security costs in line with the aging of the population.

The balance of government bonds, financing bills and other borrowing crossed the ¥1 quadrillion line for the first time ever at the end of June 2013.

The national debt stood at ¥8.06 million per capita, based on an estimated population of 127.14 million as of April 1.

Finance Minister Taro Aso said the situation has become “very severe” because of slow progress in fiscal reforms.

Of the debt, general government bonds increased ¥38.86 trillion from a year earlier to ¥743.87 trillion. Financing bills, used to procure funds for currency market intervention, totaled ¥115.69 trillion, up ¥420.8 billion.

But fiscal investment and loan program bonds, used to raise funds for loans to government affiliates, decreased ¥5.05 trillion to ¥104.21 trillion.

Long-term debt, excluding fiscal investment and loan bonds, financing bills and others, totaled ¥770.4 trillion.
* * *
So Japan's debt grew by 7 trillion in one quarter? Sure, why not. Here's why: presenting the Bank of Japan's balance sheet.

Perfectly "New", and quite sustainable, Normal.

Japan Debt Update: ¥1,020,000,000,000,000.00 | Zero Hedge

Thursday, May 8, 2014

EES: Euro down off its highs

As suspected, although for reasons that could not have been known, EUR/USD failed to breach the key 1.40 area in its trend, largely due to comments made by ECB Chair Mario D. :
The euro came under pressure across the board after ECB President Mario Draghi said the Governing Council feels comfortable with acting next time. However, as the initial shock dissipates, analysts start to raise skeptical arguments on whether the ECB will deliver. 

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Wednesday, May 7, 2014

FXDD bulk move accounts to FXCM

Dear Customer,
This letter is to notify you that FXDirectDealer, LLC (“FXDD”) will no longer be the counterparty to retail customers’ positions and will no longer service such customer accounts. We have made arrangements to transfer the custody and clearing of your account to Forex Capital Markets, LLC (“FXCM”). FXCM is registered as a Futures Commission Merchant (“FCM”) and a Retail Foreign Exchange Dealer (“RFED”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”).
FXDD has worked closely with FXCM to ensure the seamless transfer of your trading account. As a result, no action will be required on your part for your account to be transferred to FXCM. During the transfer, you will receive an email confirming the transfer of your account that will include your new account number and instructions on how to access FXCM’s various client resources. If your current trading platform is not offered by FXCM, your account will be transferred to the FXCM trading platform deemed most appropriate given your current trading platform and your trading history. If you have any questions or concerns regarding your new FXCM trading platform, please contact FXCM at
Open positions in your account(s) will be transferred. The transfer itself will not affect the equity of your account. Please note that pending orders will not be reinstated after the transfer. You must reinstate any pending orders after the transfer. You may continue to trade on your FXDD’s account up to market close on Friday, May 16, 2014. After that date you will need to contact FXCM directly at the address provided below with any questions regarding your account.

You are not required to transfer your account. If you wish to opt out of the transfer of your account, please contact us at by 1:00 PM EST on May 16, 2014. If you opt out of the transfer of your account, you have the option to (i) close all positions and receive any remaining funds or (ii) close your positions and transfer your account(s) to a firm of your choice. Should you have any questions about this notice or the transfer, please contact our Support Team by email at

FINRA Solicits Comment on Comprehensive Automated Risk Data System (CARDS) Proposal

WASHINGTON—The Financial Industry Regulatory Authority (FINRA) issued a Regulatory Notice soliciting comment regarding an innovative proposal called Comprehensive Automated Risk Data System (CARDS). CARDS will involve account reporting requirements that would allow FINRA to collect, on a standardized, automated and regular basis, account information, as well as account activity and security identification information that a firm maintains as part of its books and records.

In its first phase, the CARDS program will increase FINRA's ability to protect the investing public by utilizing automated analytics on brokerage data to identify problematic sales practice activity. FINRA plans to analyze CARDS data before examining firms on site, thereby identifying risks earlier and shifting work away from the on-site exam process.

"The information collected through CARDS will allow FINRA to run analytics that identify potential "red flags" of sales practice misconduct and help us identify potential business conduct problems with firms, branches and registered representatives," said Susan Axelrod, FINRA's Executive Vice President of Regulatory Operations.

FINRA's Regulatory Notice discusses the CARDS concept without specific rule language, to solicit comments on the appropriate design of CARDS and related costs. The core principles in FINRA's recently released Framework Regarding FINRA's Approach to Economic Impact Assessment for Proposed Rulemaking will guide the CARDS rulemaking process and help reduce unnecessary burdens to the industry.

"FINRA's new Framework will result in a more transparent and rigorous rulemaking process. FINRA will consult with key stakeholders and provide clarity about the objectives and potential impacts of the proposal," said FINRA's Chief Economist Jonathan Sokobin.

As currently envisioned, once CARDS is implemented, clearing firms (on behalf of introducing firms) and self-clearing firms would submit in an automated, standardized format, and on a regular basis, specific information relating to their customers' accounts and the customer accounts of each member firm for which they clear. 

FINRA, the Financial Industry Regulatory Authority, is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business—from registering and educating all industry participants to examining securities firms, writing rules, enforcing those rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and firms. For more information, please visit

In the midst of the financial crisis, our “leaders” had a choice. They could’ve done what most Americans wanted, which was allow failing firms to fail and permit the chips to fall where they may. In contrast, our “leaders” settled on trillion dollar bailouts with zero strings attached for the criminals who destroyed the nation’s economy. At that point, the American people would’ve been at least somewhat satisfied if the rule of law was applied to the banksters, and those who deserved to go to jail were locked up. As we all know by now, the Justice Department decided to create a special “Too Big To Jail” untouchable class, and nobody was held accountable for anything. Once again, our “leadership” could've look at the situation honestly and responded appropriately. Rather, they doubled down on corruption and criminality and now nobody trusts anything. We don’t trust the Presidency, the Congress, the intelligence agencies, the banks, the financial system, the courts, the Federal Reserve, or any institutions at all. We certainly don’t trust Democrats and Republicans. In fact, millennials in particular have given up all trust in everything. They don’t even trust Jay-z anymore, which I suppose is what happens when you prance around with Warren Buffett and flash illuminati signs 24/7. This is how society breaks down.
Moving along, with confidence in “the system” already in the gutter by summer 2013, Edward Snowden released a bombshell of information on illegal government spying. It confirmed what so many of us had been saying for years, but had been dismissed pejoratively by the mainstream as “conspiracy theorists.” Once again, our “leaders” had a choice. Take the difficult steps and offer real reform, or merely pretend nothing really happened and defend the practices at all costs. Once again, they chose the latter. Just as no bankers were jailed for the financial crisis, no intelligence operatives were jailed for illegal spying. In fact, nothing at all has happened to James Clapper for perjuring himself in front of Congress.

Automation-Market Boom

Robot is a Czech word, meaning ‘forced labor’. It’s a bit like slavery, but when it’s a machine nobody gives a damn. As if the ruling minority didn’t have enough with the mass majority drudging to the factories day-in and day-out to add value to their portfolios, now is the time when technology has reached a point where robots are a viable thing of the present, or at least the future.
• The automation market is worth an estimated $100 billion and that is predicted to quadruple within the next seven years.
• By, 2020, it will be worth a staggering $400 billion.
• That means that it will be roughly the equivalent of the e-commerce sector.
• Who wouldn’t want a chunk of that?
• The growth rate in the world market for automated products in the manufacturing sector is set to rise from its present level of approximately 6.5% per year to more than 20% after 2015.
• It will then see a second stage in the development of the automation market, whereby, within the next seven years it will spread to the services sector as technology improves and prices fall.
Funding is also increasing from international organizations and for example the European Commission is literally pouring money into what it believes to be our future. The European Investment Fund for example announced in April 2014 that it was investing in “Robolution Capital”, which is the first fund that is intended to invest in turn in European companies that are involved in the robot sector. It managed to raise some 80 million euros to invest in the sector of activity getting money from institutions, as well as the private and industrial sector.
Robots today have seen a fall in their prices roughly equivalent to a quarter of their value half a decade ago.

Just at the end of April, a Chinese construction company managed to build ten houses in 24 hours by using a giant 3D-printer. That’s a house every 2.4 hours, mainly from recycled material and costing under $5, 000. Now, we shall probably see the market flooded with cheap, low-quality housing, but at least it won’t cost as much as it does now. Perhaps, if the bubble continues, then those super-fast houses will be printed quicker than the money that rolls off the printing presses of Quantitative Easing.
• The printer that was used measures 6.6 m (22 ft) tall, 10 m (33 ft) wide and 32 m (105 ft) long.
• Little labor is needed to assemble the panel blocks that are printed.
• Whether skyscrapers can be built is another matter.
But, how long will they last.

Robots are not just there for building though.
They are extensively used today in the medical field. That may mean that one of the few winners ofObamacare may actually be robot manufacturers. It’s not just about building robot vacuum cleaners that do the cleaning why you are at the gym, but it’s Remote Presence Virtual + Independent Telemedicine Assistant (RP-VITA), or a tablet that controlled remotely in order to allow doctors that are not in the presence of the patient to give a consultation. Or there is the robot that enters a hospital room and zaps the germs and the bacteria with an ultra-violet light (Xenex), just so long as there are no people in the room at the time.
Robots: Good?

The only trouble is: you can’t help thinking that the invention and development of automated technology and robots is perhaps thought to be a way of alleviate the daily tasks that we do. Robots, however, will not replace man. They might put a few out of work, those at the very lowest echelons of society. But, the masses that are sandwiched in the middle of the ruling 1%-ers and those on the bottom rungs of life will still have to continue working. It wouldn’t do to put the mass out of work too much. Keep the majority of the mass of society just ticking over with a minimum subsistence and they will be too afraid to revolt for fear of losing what little they have.
Take everything away from them and they will start the revolution rather than hold a dinner party. The masses will just be working alongside the robots, to the benefit of the wealth, the ultra-high-net-worth people at the top and to the detriment of the poor. It’s the poor that will be out on the streets. But, that’s ok, how many people actually see a homeless person on the streets. I mean, they are there, but they are transparent, aren’t they?
Originally posted: Automation-Market Boom

Tuesday, May 6, 2014

EES: Euro near highs - backdrop of war, genocide

With EUR/USD at these levels, it may be a good time to take profits if long, and establish shorts here with stops above 1.40.  While the Euro should be feeling the pressure from impending World War 3, it still seems to be bid here going into an ECB meeting.  The USD seems to be selling off unusually strongly (certainly not based on what little negative data coming out), could be BRICs pulling money out?  

While the USD may be a net-negative of the situation developing in Ukraine, the Euro will be greatly impacted by any sanctions taken against the EU by Russia, most notably (but not totally) cuts to energy supply, or Russian import bans on EU manufactured cars (currently Russia purchasing roughly 40% of all cars manufactured in the EU).
Russia has made its first official comment following the latest escalations in Ukraine - and they are not peaceful-sounding - "We are dealing with the real genocide of both Russian and Ukrainian people,” said Russian State Duma Speaker Sergei Naryshkin, adding that Russia was shocked by the massacre in Odessa and mourns the victims together with their families. His words went further as he warned the perpetrators "will get what they deserve from their people." The words though, have now been followed up by actions... as RIA reports that Russia’s Black Sea Fleet "will get new submarines and next-generation surface ships", Russian Defense Minister Sergei Shoigu said Tuesday, voicing his concern at the increasing maritime activity of the US Navy.

The Fed Could Have Bought California & Texas… or All of China & Japan's Treasuries With QE Money

The Federal Reserve has spent over $3.2 trillion in the post-Crisis era.
The bulk of this money printing has gone towards buying garbage mortgage securities or US Treasuries from Wall Street.
Because we’ve reached a point in time at which $1 trillion no longer sounds like a lot of money, we thought we’d go through the exercise of assessing just what the Fed could have done with this money besides give it to Wall Street.
With $3.2 trillion, the Fed could have:
1)   Mailed a check for $10,223 to every man, woman, and child in the US.
2)   Bought back all of the US debt owned by China, Japan, Belgium as well as the debt acquired via investors through the Caribbean islands.
3)   Bought all of France’s economy for a year (or the UK or Brazil depending on its preference) and still had $600 billion or more left over.
4)   Performed leveraged buyouts of California and Texas.
5)   Funded NASA for the next 188 years.
6)   Treated every person on the planet to $200 five star dinners at one of New York’s top restaurants, along with a night’s stay in the Big Apple.
7)   Bought every human being on earth a PlayStation 4 gaming console… and still had enough money left over to buy all of Peru and Ireland’s economies for a year.
It’s quite impressive, isn’t it?
We’re repeatedly told that the Fed has to engage in QE to help the recovery and create jobs. But the facts show otherwise. The economy has added nearly 9 million jobs.
But the Fed could have spent the $3.2 trillion to create 12.8 million jobs in 2009, each paying $50K per year, and stillbe making payroll for them today.
Obviously, that’s an absurd notion, but then again, spending $3.2 trillion on anything without any evidence that your policies are really working is absurd (job growth remains anemic with the recovery being the worst in 80+ years).
Indeed, QE failed to put a dent in Japan’s jobs picture over the last 20 years. It also failed to do much for the UK. Why would it somehow be different in the US?

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Monday, May 5, 2014

AP ENTERPRISE: US to unleash IRS on Russian banks

WASHINGTON (AP) -- As the United States attempts to punish Russia for its actions in Ukraine, the Treasury Department is deploying an economic weapon that could prove more costly than sanctions: the Internal Revenue Service.
This summer, the U.S. plans to start using a new law that will make it more expensive for Russian banks to do business in America.
"It's a huge deal," says Mark E. Matthews, a former IRS deputy commissioner. "It would throw enormous uncertainty into the Russian banking community."
Long before the Ukraine crisis, Congress approved the law in 2010 to curb tax evasion that relies on overseas accounts. Now, beginning in July, U.S. banks will be required to start withholding a 30 percent tax on certain payments to financial institutions in other countries - unless those foreign banks have agreements in place to share information about U.S. account holders with the IRS. The withholding applies mainly to investment income.
Russia and dozens of other countries have been negotiating information-sharing agreements with the U.S. in an effort to spare their banks from such harsh penalties.
But after Russia annexed Crimea and was seen as stoking separatist movements in eastern Ukraine, the Treasury Department quietly suspended negotiations in March. With the July 1 deadline approaching, Russian banks are now concerned that the price of investing in the United States is about to go up.
The new law means that Russian banks that buy U.S. securities after July 1 will forfeit 30 percent of the interest and dividend payments. The withholding applies to stocks and bonds, including U.S. Treasuries. Some previously owned securities would be exempt from the withholding, but in general, previously owned stocks would not.
Private investors who use Russian financial institutions to facilitate trades also face the withholding penalty. Those private investors could later apply to the IRS for refunds, but the inconvenience would be enormous.
"It's a big problem for them," said Matthews, who is now a lawyer at Caplin & Drysdale, a tax firm based in Washington. "It decreases their competitiveness and they may have capital flight elsewhere."
The U.S. and Russia are significant trading partners, though not all transactions would be subject to withholding. Last year, the U.S. imported $27 billion in goods from Russia, which ranked 18th among importers to the U.S., according to the Census Bureau. The U.S. exported $11 billion in goods to Russia.
The withholding would expand in 2017, if there was still no information-sharing agreement. At that point, if investors sold stocks or bonds, U.S. banks would be required to withhold a 30 percent tax on the gross proceeds from those sales.
The law would also snag big global banks with subsidiaries that don't have agreements with the IRS to share information. At first the withholding could be limited to the subsidiaries. But eventually, if any part of a large global bank refused to comply with the information-sharing requirements, the entire bank would be penalized.
"That keeps an institution from deciding that it's going to register its entity in Germany but not register the entity it has in Switzerland," said Denise Hintzke of Deloitte Tax.
It would also provide a tremendous disincentive for large global banks to do business in countries where they can't share information with U.S. authorities.
More than 50 countries have reached agreements with the U.S. to share tax information about U.S. account holders. The list includes countries famous for bank secrecy, such as Switzerland and the Cayman Islands.
For Russia, the penalties could be more damaging to its economy than U.S. sanctions, said Brian L. Zimbler, managing partner of the Moscow office of Morgan Lewis, an international law firm.
"If sanctions are going to be limited to certain targeted individuals and banks, where this applies to everybody in the market, yes, I think this could potentially be worse than sanctions for the Russians," Zimbler said.
The 2010 law is known as FATCA, which stands for the Foreign Account Tax Compliance Act. It was designed to encourage - some say force - foreign banks to share information about U.S. account holders with the IRS, making it more difficult for Americans to use overseas accounts to evade U.S. taxes.
Under the law, U.S. banks that fail to withhold the tax would be liable for it themselves, a powerful incentive to comply. On Friday, the Treasury Department issued guidance saying it will give U.S. banks a temporary reprieve. As long as U.S. banks make a good-faith effort to withhold the proper tax, they won't be liable for mistakes until 2016.
The goal of the law was to set up a penalty so harsh that foreign banks would have little choice but to share information with U.S. authorities, Matthews said.
"Withholding is a failure of the system," Matthews said. "Withholding was just a big stick out there. No one hoped that would happen."
The Treasury Department said Russian banks can still apply on their own to share information about U.S. account holders directly with the IRS. But those banks may risk violating local privacy laws by sharing such information with a foreign government.
"They can't do it," Zimbler said. "Russia does have bank secrecy laws."
It is a problem that banks around the world are facing. To get around the hurdle, the Treasury Department has been negotiating agreements in which foreign governments will collect the information from their banks and then share it with U.S. authorities. Russia was negotiating one of these agreements when the U.S. broke off talks.
Russian banks face another hurdle: time. In June, the Treasury Department is scheduled to release a list of foreign banks that are exempt from withholding. If your bank isn't on the list, U.S. banks are required to start withholding 30 percent of your payments in July.
The deadline for getting on the list was Monday, just a few weeks after the U.S. and Russia suspended negotiations.

Is This The Reason For The Relentless Treasury Bid?

Over the weekend, Bloomberg had an interesting piece about two of the main reasons why while stocks continue to rise to new all time highs, the expected selling in bonds - because in a normal world, what is good for stocks should be bad for bonds - isn't materializing, and instead earlier this morning the 10 Year tumbled to the lowest since February, while last week the 30 Year retraced 50% of its post-Taper Tantrum slide, or in short a complete disconnect between stocks and bonds.
In a world awash with U.S. government bonds, buyers of the longest-term Treasuries are facing a potential shortage of supply.

Excluding those held by the Federal Reserve, Treasuries due in 10 years or more account for just 5 percent of the $12.1 trillion market for U.S. debt. New rules designed to plug shortfalls at pension funds may now triple their purchases of longer-dated Treasuries, creating $300 billion in extra demand over the next two years that would equal almost half the $642 billion outstanding, Bank of Nova Scotia estimates.

“It’s driven by a scarcity and liquidity valuation,” Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia, one of the 22 primary dealers that trade with the Fed, said in an April 28 telephone interview from New York. “The pressure on the long-end will be for lower yields.”

Fixed-income demand has “far outpaced the supply,” Brett Cornwell, vice president of fixed-income at Callan Associates, an adviser to pension funds with $2 trillion of assets, said by telephone from San Francisco on May 1. “We should continue to see this de-risking of corporate pension plans.”

Pensions that closed deficits are pouring into Treasuries and exiting stocks to reduce volatility after a provision in the Budget Act of 2013 raised the amount underfunded plans are required to pay in insurance premiums over the next two years. It also imposed stiffer fees on those with shortfalls.

In the next 12 months alone, buying from private pensions will create $150 billion in demand for longer-maturity Treasuries, based on Bank of Nova Scotia’s estimates.
Interesting... but certainly nothing new to Zero Hedge readers. After all, we have been explaining until blue in the face for well over a year, that it is the Fed's sequestration of "high quality collateral" through trillions in QE (in effect monetizing the deficit through duration-risk exposure) and the illiquidity risks it generates that explains the Fed's eagerness to commence, and continue, tapering as the amount of available bonds to the private market has simply collapsed, especially at the longer end.
First recall from our August piece on "What The Fed Owns: Complete Treasury Holdings Breakdown"
As everyone knows (since the data is public), in the most recent week the Fed's balance sheet rose to a record $3.646 trillion, an increase of $61 billion in the past week, and a record increase of $813 billion over the past year, a whopping 30% rise in the balance sheet in 12 short months. What may not be known is the exact distribution of Fed Treasury holdings by maturity. So without further ado, here it is. Of note, observe that what once was a predominantly 'short-end' balance sheet (consisting mostly of no-coupon, money equivalent Bills), has become almost entirely a "5 and over" current coupon carry affair. Which also is why the Fed now takes over the entire bond market at a rate of 0.25% per week.

Perhaps the best source of real, actionable financial information, at least as sourced by Wall Street itself, comes in the form of the appendix to the quarterly Treasury Borrowing Advisory Committee (TBAC, aka the Goldman-JPM chaired supercommittee that really runs the world) presentation published as part of the Treasury's refunding data dump. These have informed us in the past about Goldman's view on floaters, as well as Credit Suisse's view on the massive and deteriorating shortage across "high quality collateral." This quarter was no different, only this time the indirect author of  the TBAC's section on fixed-income market liquidity was none other than Citi's Matt King, whose style is well known to all who frequent these pages simply because we cover his reports consistently. The topic: liquidity. Or rather the absolute lack thereof, despite what the HFT lobby would like.

... [D]espite what various new "technology" lobbies, such as the HFT's, all of which are merely peddling legal millisecond frontrunning services, the TBAC's conclusion is the opposite: be afraid, be very afraid. Because just when you need liquidity it will be gone.

First, how does one define liquidity? Here is how the smartest guys in the room (and Matt King truly is one of the smartest guy) do:

As the chart points out, the biggest falacy constantly perpetuated by market naivists, that liquidity and volume (in this case in fixed income) are one and the same, is absolutely wrong. Of course, in equity markets it is far worse because while volumes are crashing, liquidity is far worse.


In other words, while the Fed, and the TBAC, both lament the scarcity of quality collateral and liquidity in non-Fed backstopped security markets, it is the Fed's continued presence in the (TSY) market in the first place, that is making a mockery of bond market liquidity and quality collateral procurement. And without faith in a stable credit marketplace, there is no way that a credit-based instrument can ever truly become the much needed "high quality collateral" to displace the Fed's monthly injection of infinitely funigble and repoable reserves (most benefiting foreign banks).
The most important chart that nobody at the Fed seems to pay any attention to, and certainly none of the economists who urge the Fed to accelerate its monetization of Treasury paper, is shown below: it shows the Fed's total holdings of the entire bond market expressed in 10 Year equivalents (because as a reminder to the Krugmans and Bullards of the world a 3 Year is not the same as a 30 Year). As we, and the TBAC, have been pounding the table over the past year (herehere and here as a sample), the amount of securities that the Fed can absorb without crushing the liquidity in the "deepest" bond market in the world is rapidly declining, and specifically now that the Fed has refused to taper, it is absorbingover 0.3% of all Ten Year Equivalents, also known as "High Quality Collateral", from the private sector every week. The total number as per the most recent weekly update is now a whopping 33.18%, up from 32.85% the week before. Or, said otherwise, the Fed now owns a third of the entire US bond market.

The following statement and chart from the RBS' Drew Brick pretty much explains it all: "QE has seen the Fed extend its dominion on the US curve away from the short-end and into longer duration paper is patent, too. On a rolling six-month average, in fact, the Fed is now responsible for monetizing a record 70% of all net supply measured in 10y equivalents. This represents a reliance on the Fed that is greater than ever before in history!"

And who can forget, from July when "expert" economists were absolutely certain there would be no tapering after the "Taper Tantrum", that "Fed Tapering Assured As Treasury Projects 30% Slide In Annual Funding (And Monetization) Needs."
As for the Pension Fund bid that too was covered in "Here Comes The Next Great Rotation: Out Of Stocks And Into Bonds":
... if the great rotation out of bonds into stocks was the story of 2013, it now appears that 2014 will see another great rotation - a mirror image one, out of stocks and back into bonds, driven on one hand, of course, by the Fed which will continue to monetize the bulk of net duration issuance for the foreseeable future, but more importantly, by some $16 trillion in corporate pension assets which after (almost) recovering their post-crisis high water market are once again, will now phase out their risky holdings in favor of safe (Treasury) exposure.  As Scotiabank's Guy Haselmann explains, "The rationale is quite simply that the cost/benefit equation changes as the plans’ funding status improves. In other words, the upside for a firm with a fully-funded plan is less rewarding than for an under-funded plan."

Needless to say, the Fed, which is doing everything in its power to push marginal buyers out of a bond purchasing decision and instead to chase Ponzi risk into equities, will not be happy, especially since QE is tapering, and suddenly instead of everyone frontrunning the Fed, the momentum chasers will proceed to scramble after the largest marginal players around - pension funds, which however will be engaging in precisely the opposite behavior as the Fed!
So yes, interesting, but nothing new or surprising and certainly nothing that hasn't been known for over a year.
Which begs the question: while stocks no longer eflect anything except some momentum ignition algo in the USDJPY, and simply go along the path of least Fed resistance, even though the Fed is now actively shutting down its stock goosing machinery, if only for the time being, just like it did after QE1 and QE2 (and everyone knows what happened next), bonds at least on the surface are far more rational. Or were before central-planning.
Which is why we are disturbed - if indeed Bloomberg's report is seen as "news" for bond market managers then things are really far more broken than even we expected, and not even the bond market has any discounting capacity left. We are not that pessimistic - while stocks are merely a policy vehicle and a "report card" for the administration (since the economy's ongoing contraction has to be explained away by snowfall in the winter), the bond market is sufficiently large than not even the Fed can unilaterally dominate it. At least not yet, while the Fed holds "only" 35% of all 10 year equivalents (check back in 3-5 years when the Fed is at its SOMA limit for every CUSIP).
All that said, we agree that there is a bid for Treasurys, but we disagree that the bid is the result of either the collapse in private market supply, or the Pension unrotation - both things that have been known and priced in long ago.
What is far more likely, and what the rumor has been for the past month or so, is that none other than Japan is now allocating its own assets under management into US bonds, particularly into the 10Y+ part of the curve, just as it, together with other yield chasers, have succeeded in extracting every ounce of yield out of the Spanish bond yield, today trading at a ridiculous 2.98%, 100 bps below where it started the year.
Our only question is what type of event could force the GPIF and other fixed income asset allocators to finally stop buying bonds - because if not even the "cheerful" perspective of the US recovery, for 288K jobs certainly is that unless of course one actually reads the writing between the line, can lessen the bid (certainly facilitated by the Ukraine civil war), then we are at a loss what could halt this buying juggernaut into an asset class that the Fed and its central bank peers loathe with a passion, and are hoping will slid back to the mid-3% soon, or else the narrative about some recovery will be completely crushed.