Called It

You thought my last piece on “Bond Vigilantes” was a joke, didn’t you? NOPE.

On Zerohedge today: The Bond Vigilantes Are Here: US Net Notional CDS Outstanding Surpasses Greece For The First Time

As the first chart below shows [follow the link to see the charts and the article], of the Top 25 CDS outstanding net notional names tracked by DTCC, there is one name that is a big outlier on both a month over month and year over year basis: the United States of America. Yes: the CDS itself has not blown out yet, but the stealthy increase in the net notional in the troika of “most stable countries” means that the smart money is already quietly positioning itself for the biggest and most significant blow out ever. It also means that the spreads of such countries of Greece and Portugal (a major drop in net notional M/M and Y/Y) not to mention Italy, are yesterday’s news. As most revel in the latest nonsensical Group of 6 plan, the bond vigilantes are already quietly setting the trap.

ZH also links to this noteworthy piece on Reuters: Exclusive: Fed planning for potential default

(Reuters) – The Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s $14.3 trillion borrowing limit looms, a top Fed policymaker said on Wednesday.

Cue Godzilla!