Bill Gross, trader naivety, Janet Yellen and unreliable data caused the bonds sell-off. Pimco says the worst is over. The markets remain edgy. The Slog investigates.

I spent much of yesterday postulating (a nasty habit at the best of times) about Asian sovereigns selling off bonds to create broader rate contagion and thus deflate asset bubbles. But there’s no evidence at all for it. As in, none whatsoever. I think I hugely overestimated the IQ of governments staring down the barrel of an inevitable asset crash in parts of Asia; but on reflection – having done some thinky-diggy yesterday evening – I think the IQ I mainly overestimated was that of the markets themselves. The wisdom of crowds was always, after all, meant to be ironic bordering on sarcastic. You could call it ironcastic in fact, but there’s nothing cast iron about any markets anywhere today.

The first thing I remembered was a Twittercon from the weekend about guru Bill Gross betting against German bunds. The nice thing about reaching guru stage is that you can at times fulfil your own prophecy just by making it; Warren Buffet does it regularly. The suddenness of the move was probably, I suspect, Gross (unwittingly?) directionalising a market full of folks who have no idea what they’re at most of the time.

That may seem unkind, but it is backed up by the now gathering majority view among senior traders yesterday that the spike represents the start of Return to Normal: “the eurozone is showing some green shoots, and the US may finally be turning the corner” goes the mantra. Bonds spent the later hours of yesterday wiping out most of the previous losses, but the rally seems to have been shortlived.

What I mean by people who have no idea what they’re at is those who read the obfuscation and false optimism pumped out by the ECB, George Osborne during an election campaign, and those in Washington who grasp every ounce of data by the neck and yell, “We are saved!”. The thing with engineered bond spikes and optimistic data is that they can turn into a panic – for which there is no known cure.

Talking of Yellen, I think she has had some indirect influence too. Sticking to her tapering and rate rise outlook, Auntie Janet may well have helped a little – once the spike occurred – to think “this is it…the party’s over…let’s sell bonds”. Perhaps this is why she tried to dampen things late Monday by saying she thought stocks to be “on the high side”.

That’s like saying Charles de Gaulle was slightly tall. The western world stock markets continue (thanks to QE) to ensure that prices have no correlation whatsoever with business performance: bottom lines are being stoked bigtime by lax money, and everyone knows it. Take QE out of the market growth measurements, and there is none. But we’ve been here a hundred times.

Some blamed a dry-up in liquidity, which I don’t find remotely credible. Credulity is stretched further too when BoA serves up this kind of jargobollocks:

The cumulative result of so much central bank support is that the market’s emotional gap between fear and greed has narrowed. This has ultimately given rise to more erratic price swings”.

The analogy I find myself making more and more these days is that, just as politicians live in a hermetically sealed bubble, so too do Bourses and those who trade on them professionally. So let’s try some real facts to challenge the “turning the corner” drivel…and observe some of the Sovereign Dirty Tricks in play:

* Oil prices are still, net, falling. Some of it is geopolitical manipulation, but a lot of it is low demand.

* French PMI data is dire to the negative, but this morning we see growth is “surging ahead” at 0.4% for Q1 2015. Surging? Europols are correlating this with Draghi’s QE. There cannot possibly be a correlation this early. Anyway, exports are still awful: it’s 1.5b euros in the red again.

* Germany has slowed down.

* Morgan Stanley has recently downgraded China, citing ‘deteriorating profitability’ and the conclusion it is technically overbought.

* The UK economy remains firmly and dangerously biased towards financial services. and its Q1 figures were the worst for 15 months..

* After the world’s biggest QE input, Japanese bank lending stays anchored at 2.6%.

* The European Commission is hastily pushing through laws ‘designed to preserve the value of firms in difficulty’….aka, fiddle the books so no bankruptcy occurs.

* Two weeks ago, Schäuble told us Spain was in recovery. Today we find it isn’t: it’s still in deflation. He said insolvencies were falling: they aren’t, it’s just that the Rajoy Government is ‘restructuring’ them….at which point – like LTUs in the States – they disappear from the stats.

* Portugal’s scam is to encourage out-of-court settlements….which are also not counted as bankruptcies.

Every sign pointing to obvious world slump is hastily buried beneath ten metres of reinforced concrete, and then ‘corrected’ by lies.

The world of 1984 is here….a mere 30 years late. Nobody knows who or what to believe, and far too few have common sense to fall back on. I repeat (yawn), ‘Anything could happen but nothing will change’.

Yesterday at The Slog: Rising above politics