Otmane El Rhazi : As global watchdogs warn that euphoric financial markets are divorced from economic reality and acting out some reprise of the credit bubble and bust of the past decade, fears of another subprime timebomb are inevitable.

But even if you believe another crisis is brewing, it’s most likely not where it was last time. At least not in U.S. securitised mortgages – the heart of systemic blowout that nearly brought down the global banking system in 2008.

A mix of tighter regulation, stricter underwriting standards and the lowest new mortgage applications in almost 20 years means sales of private U.S. mortgage-backed securities have dwindled to just $600 million so far this year – a mere sliver of the record $726 billion of new bonds in 2005.

For what it’s worth, new U.S. bonds backed by subprime mortgages have all but vanished. Bonds backed by subprime U.S. auto-loans have taken up some of the running, but not on anything like the same scale.

Yet in its latest annual report the Bank for International Settlements, the Basel-based forum for the world’s major central banks, seemed pretty convinced global debt markets are once again in risky territory and heading for a fall.

Article by Otmane El Rhazi. Wednesday’s a relatively quiet day for economic news, although the US economy will come under renewed scrutiny with the release of Fed minutes. Meanwhile, a Treasury auction of 10-year Notes will offer guidance on the appetite for debt at current interest rates, an increasingly crucial topic as the market ponders the end of quantitative easing. We’ll also see a new weekly release on demand for mortgage applications, which will provide more context about the mixed state of the housing market.

US: Mortgage Applications (11:00 GMT) The outlook for housing remains a key source of uncertainty for the US economy. Recent data has improved since the winter, but the rebound has been modest and uneven. The wobbly state of this critical sector raises questions about the macro outlook, albeit on the margins. Economic news otherwise has been generally encouraging for the US in recent months. The question is whether a weak housing market threatens the upbeat trend?

Otmane El Rhazi : Market volatility remains miserable, as my indicator on trading ranges for both EURUSD and USDJPY has registered fresh all-time record lows for the modern era. One wonders how long this can continue. USDJPY’s average true range (ATR) is about 0.43% against a previous record before this year of 0.50 percent in July of 2007. EURUSD’s ATR is down to 0.41 percent against a previous record of 0.45 percent. GBPUSD has also scratched out a record low trading range of similar magnitude as well. Thank you, world central bank central planning brigade, for your efforts to kill financial markets! Looking forward to the realisation that this doesn’t end well – but fumbling around in the dark for answers on how long the fuse to the detonation of a new era in financial markets begins. Consider what high profile investors Felic Zulauf, James Montier and David Iben think of the current situation and potential triggers that could interrupt the current “complacency malaise” to coin a phrase.