The "tax twist" is a big deal

Here is how the tax twist worked.

Step 1: One trillion of US corporate profit repatriation. US tax reform resulted in all offshore corporate profits being deemed repatriated and relieved of future tax liabilities. This in turn resulted in a record-breaking 1 trillion dollar shift of US corporate earnings to their onshore entities. The shift had no currency impact the liquidity was already held in short-dated dollar assets but merely recorded offshore from an accounting perspective. It happened all in one go in the first half of the year.

Step 2: US corporates liquidate their dollar deposits . One of the unusual features of this Fed hiking cycle has been rising money market rates over and above the increase in Fed fund rates. This can be most clearly seen in rising Libor OIS spreads earlier this year. Part of this rise is attributable to the surge in treasury bill issuance. But spreads rose in commercial paper and front-end credit where most of offshore US corporate liquidity resided too. Just as the Fed started raising the risk-free rate, US corporates abandoned dollar liquidity. What did US corporates do?

Step 3: US corporate buybacks soar, the first twist. The bulk of corporate repatriation was deployed in equity buybacks. S&P 500 purchases have soared to the highest on record this year and we project will reach $800bn by year-end. To the extent that US corporate dollar liquidity was sitting unused in short-dated assets, this deployment of cash constitutes one of the largest risk transfers in the history of financial markets.

Step 4: Pension funds rotate from equities to bonds, the second twist. Our fixed income colleagues have documented the pension fund rotation dynamic well. US pensions are over-weight equities and stock out-performance this year has led to large liquidation of their holdings, in turn deployed into long-dated US bonds. This buying can best be seen in the record-breaking size of stripped treasuries, the preferred habitat of US pension funds. The surprising yield curve flatness this year can be mainly attributed to the pension phenomenon representing a price-insensitive removal of fixed income duration from the market equivalent to Fed QE.

Deutsche Bank

  

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Diverse Gurus ber das aktuelle Brsengeschehen 7 [Alle anzeigen] , Rang: SieurKolou74(296), 03.2.18 16:08
 
Subject Auszeichnungen Author Message Date ID
Investorenlegende warnt Anleger
03.2.18 16:11
1
RE: Investorenlegende warnt Anleger
04.2.18 06:01
2
      RE: Investorenlegende warnt Anlegerinteressant
04.2.18 23:00
3
      @byronwien
05.2.18 05:44
4
      RE: @byronwien
05.2.18 10:46
5
      RE: @byronwiengut analysiert
05.2.18 18:43
6
      RE: @byronwien
05.2.18 21:05
7
      RE: @byronwien
05.2.18 22:49
8
      crash
05.2.18 23:02
9
      RE: crash
06.2.18 10:15
10
      RE: @byronwien
05.2.18 23:14
11
      RE: @byronwien
05.2.18 23:34
12
      RE: @byronwien
05.2.18 23:35
13
      RE: @byronwien
05.2.18 23:51
14
      RE: @byronwien
05.2.18 23:59
15
      RE: @byronwien
06.2.18 00:14
16
      RE: @byronwien
06.2.18 06:08
17
      RE: @byronwien
06.2.18 07:11
18
      RE: @byronwieninteressantinteressantinteressant
06.2.18 07:35
19
      Auch Tokio strzt mit
06.2.18 07:42
20
      RE: Auch Tokio strzt mit
06.2.18 08:00
21
      VIX at 38 Is Waterloo for the Beloved Short Volatility ...interessant
06.2.18 08:07
22
      Here's Who Owned Those Crumbling VIX Notes as of Last F...
06.2.18 08:15
23
      Inverse VIX - how it works
06.2.18 09:56
24
      Volatility Jump Has Traders Asking About VIX Note Poiso...
06.2.18 11:39
25
      RE: Inverse VIX - Prospekt lesen zahlt sich gelegentlic...
07.2.18 22:22
26
      VIX-Knockout bei CS
12.2.18 14:32
27
      RE: @byronwien
06.2.18 12:07
28
      RE: @byronwien
06.2.18 17:45
29
      RE: @byronwiengut analysiert
06.2.18 17:57
30
      Inflation ist alles
06.2.18 18:01
31
      A healthy pullback
07.2.18 14:38
32
Fed implications of the employment report
05.2.18 08:41
33
`Buy the Dip' Takes Hold at Allianz to JPMorgan as Rout...
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34
buying opportunity?
08.2.18 17:47
35
Wienerberger - Der ideale bernahmekandidat
09.2.18 13:41
36
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37
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11.2.18 10:52
38
Die EZB werde die Zinsen heuer sicher nicht mehr anhebe...
11.2.18 18:55
39
Keine Brenphase, sondern nur Korrektur? interessant
12.2.18 13:03
40
These Bonds Should Make ECB Hawks Apoplectic With Rage
12.2.18 13:43
41
Morgan Stanley Strategist Who Predicted Volatility Says...
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42
Financial markets are all about stories
12.2.18 17:14
43
All the President's deficits
13.2.18 14:36
44
Schwere Zeiten fr Bonds im Kommen
14.2.18 16:26
45
Ray Dalio's Short-Bet Puzzle Is Missing Some Pieces
18.2.18 17:26
46
Add Stock Buybacks to the Causes of the Market Downturn
18.2.18 17:56
47
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19.2.18 10:03
48
We continue to think the Fed will hike four times each ...
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49
The Q4 earnings season is in its final stages
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50
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51
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52
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22.2.18 22:00
53
US Inflation
23.2.18 15:00
54
QE ending
25.2.18 15:02
55
Steve Schwarzman: The stock market's performance doesn'...
26.2.18 21:13
56
US stock buybacks are running at a record pace
03.3.18 10:23
57
Has the marginal equity buyer gone?
05.3.18 10:35
58
ECB Takes Steinhoff Losses in Its Stride
06.3.18 08:26
59
growth momentum is still robust and above-trend
09.3.18 10:50
60
The Tide Isnt Turning on Trade
11.3.18 14:08
61
Our US Equity strategists remain positive
19.3.18 10:21
62
Our Global Equity Strategists remain constructive
19.3.18 10:23
63
      Oil has remained in range for the last six weeks
19.3.18 10:47
64
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65
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66
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22.3.18 10:03
67
Draghi's Success Is Double-Edged as Labor Boom Adds to ...
23.3.18 12:30
68
JPMorgan Sees Market Overcoming Stock Rout, But Beware ...
25.3.18 16:32
69
What perhaps stood out the most about the price action ...
26.3.18 12:08
70
What Keeps Dalio Up At Night:
26.3.18 17:03
71
RE: Trump
27.3.18 09:56
72
Einfuhrzlle, Stagflationsgefahr und normale Aktiensch...
04.4.18 13:32
73
RE: Einfuhrzlle, Stagflationsgefahr und normale Aktie...
04.4.18 13:35
74
JPM: Eurozone to be bottoming out vs the US
10.4.18 16:09
75
Q1 reporting season that kicks off this week will remin...
12.4.18 15:17
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Debatte um Banken-Verluste
17.4.18 08:51
77
Rates markets are busy with the shape of the yield curv...
16.4.18 12:57
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Eroding the benefits of tax reform through America Firs...
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Lessons From 15 Years Of Short Selling: 12 Reasons Not ...
23.4.18 16:20
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10 Reasons To Short
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The last days of Whitney Tilsons Hedge Fund
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Lessons From 15 Years Of Short Selling: A Veteran's Adv...
30.4.18 21:38
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JPM Equity strategists continue to see further upside i...
24.4.18 15:27
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Warren Buffett explains how you could've turned $114 in...
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86
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30.4.18 15:19
87
Buffett warnt vor Bitcoin und lobt Apple
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Das Warren Buffet Imperium grafisch dargestellt
07.5.18 10:53
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RE: Das Warren Buffet Strategie
07.5.18 10:57
90
Global equities remain in a consolidation mode
07.5.18 15:34
91
We remain positive on equities based on two strong fund...
07.5.18 16:49
92
      non-linear burst in wage and price inflation?
07.5.18 17:06
93
Trump twittert: "Freue mich auf Arbeitsmarktbericht"
01.6.18 16:22
94
RE: Trump twittert:
03.6.18 20:50
95
Our Global equity strategists believe that the fundamen...
02.6.18 18:52
96
RE: Diverse Gurus ber das aktuelle Brsengeschehen 7
12.6.18 08:37
97
ECB policy announcement a material negative for the eur...
14.6.18 14:56
98
A yield curve inversion at the longer end also
18.6.18 09:14
99
Fed: This is not a consistent forecast
19.6.18 13:48
100
The tit-for-tat trade barbs intensify
20.6.18 16:31
101
Trade war tensions
27.6.18 11:03
102
RBI: Handelskonflikte derzeit grtes Risiko fr Kapita...
27.6.18 14:07
103
Zwischencheck vor der Sommerpause
02.7.18 21:42
104
Trade war noch egal
09.7.18 10:36
105
Autos have never been this cheap
09.7.18 18:06
106
Handelskonflikte - RBI-Brezinschek: "EU kein Mustersch...
13.7.18 12:05
107
Economics:
15.7.18 12:41
108
Trade headlines driven dips as a buying opportunity
15.7.18 12:50
109
Lets spend less time looking at the yield curve and mo...
16.7.18 15:15
110
How strong is corporate activity?
16.7.18 15:51
111
Fed-Chef sieht US-Konjunktur trotz Handelsstreit optimi...
18.7.18 09:45
112
Quantifying trade war is difficult
18.7.18 17:39
113
Trade war impacting soft data but not hard data
19.7.18 14:59
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RE: Trade war impacting soft data but not hard data
19.7.18 15:21
115
@realDonaldTrump: Euro ist manipuliert
20.7.18 14:51
116
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 16:31
117
RE: @realDonaldTrump: und die Zinsen auch falsch gut analysiertwitzig
20.7.18 16:51
118
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 16:53
119
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 17:04
120
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 19:08
121
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 19:39
122
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 20:07
123
RE: @realDonaldTrump: und die Zinsen auch falsch
20.7.18 20:15
124
RE: @realDonaldTrump: und die Zinsen auch falsch
21.7.18 11:30
125
RE: @realDonaldTrump: und die Zinsen auch falsch
21.7.18 13:10
126
RE: @realDonaldTrump: und die Zinsen auch falsch interessant
21.7.18 13:50
127
RE: @realDonaldTrump: Vorschlag: Drop all Tariffs
25.7.18 11:14
128
How late is the cycle?
21.7.18 09:05
129
Our Global Equity strategists believe Q2 reporting seas...
23.7.18 15:21
130
Our Global Equity strategists continue to have a constr...
29.7.18 17:14
131
Equity markets struggled this week despite strong earni...
05.8.18 17:03
132
Fridays 157k jobs headline significantly understates t...
06.8.18 09:48
133
Interessante Perspektive zu Handelskrieg
06.8.18 11:29
134
Earning season so far
06.8.18 11:38
135
US outlook bends but doesn't break as trade stakes rise
06.8.18 14:29
136
I have just authorized a doubling of Tariffs on Steel a...
10.8.18 14:51
137
RBI-konom Deuber: sterreich ist von Trkei-Krise weni...
12.8.18 12:18
138
Investor sentiment appears to be quite cautious
12.8.18 16:47
139
WIIW-Experte: Trkische Notenbank muss Zinsen deutlich ...
13.8.18 15:11
140
Turkey: What are the risks?
16.8.18 12:24
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Trade War Wont Dent Chinas GDP
20.8.18 09:40
142
Investment-Punk im Interview
02.9.18 22:45
143
RE: Investment-Punk im Interview
03.9.18 05:44
144
      RE: Investment-Punk im Interview
03.9.18 06:13
145
      RE: Investment-Punk im Interview
03.9.18 10:09
146
      RE: Investment-Punk im Interview
03.9.18 10:53
147
      RE: Investment-Punk im Interview
03.9.18 11:24
148
Alois Wgerbauer: Investieren ist einfach, aber nicht l...
04.9.18 08:41
149
A stock-market bear signal is at a more-than-4-decade h...
10.9.18 20:41
150
Mining, Autos and Semiconductors are likely to bounce i...
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151
Goldman Says Rising U.S. Rates Boiling the Frog of Ri...
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152
"Ohne Gegenmanahmen gewinnt Trump im Handelskrieg"
19.9.18 10:07
153
Das Fed-Problem
21.9.18 11:38
154
Cyclicals will rebound
23.9.18 16:33
155
lpreisprognoseanhebung
23.9.18 18:17
156
Nowotny, seufz
23.9.18 19:51
157
RBI-Brezinschek: Gute Aussichten fr Wirtschaft und Fin...
28.9.18 16:02
158
JPMorgan Says U.S.-China Tariffs to Go All Out
30.9.18 15:47
159
Schieferfelder sind relativ rasch leer gepumpt
02.10.18 09:48
160
Insurance sector as a hedge on rising yields
09.10.18 14:31
161
Why are retail investors still cautious?
09.10.18 14:48
162
US-China tension and US equity selloff
11.10.18 12:34
163
Unfair to make comparisons between Italy and Greece
11.10.18 12:39
164
The
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165
Update on Market Moves
12.10.18 19:05
166
JPMorgan: The dip should be bought
13.10.18 10:35
167
The direct impact of such a trade war is unlikely to be...
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168
Global Equity Strategy View
13.10.18 14:06
169
Looming "cold war" will hurt US business in China
15.10.18 10:13
170

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