Aug 31

Is China Dumping German Paper Now? Bund Prices Are Collapsing (ZeroHedge, Aug 31, 2015):

German bonds are under significant pressure again this morning – despite equity weakness and US Treasury strength. This raises the rather interesting question of whether – after decimating Treasuries last week, is China turning to its Bund holdings and liquidating them to raise cash?

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Aug 28

The Great Unwind, China Begins Dumping Treasuries (Sprott Money):

US Treasuries-2

charts from: http://www.globalpost.com/dispatch/news/regions/americas/united-states/150204/chart-us-foreign-debt

Behind the scenes is an event unfolding that has the market shaking in its boots. Yet you don’t hear this discussed by the mainstream media, let alone investment bankers.

The reason? It is an event that has been talked about throughout China’s rise to prominence. It has been pondered and feared by Western bankers and politicians. The event I am talking about is the dumping of US treasuries by China. Continue reading »

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Aug 27

Chinese Wall in the Mist

It’s Official: China Confirms It Has Begun Liquidating Treasuries, Warns Washington (ZeroHedge, Aug 27, 2015):

As Bloomberg reports, “China has cut its holdings of U.S. Treasuries this month to raise dollars needed to support the yuan in the wake of a shock devaluation two weeks ago, according to people familiar with the matter. Channels for such transactions include China selling directly, as well as through agents in Belgium and Switzerland, said one of the people, who declined to be identified as the information isn’t public. China has communicated with U.S. authorities about the sales.”

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Aug 27

What China’s Treasury Liquidation Means: $1 Trillion QE In Reverse (ZeroHedge, Aug 27, 2015):

The size of the epic RMB carry trade could be as high as $1.1 trillion. If China were to liquidate $1 trillion in reserves (i.e. USTs) in order to stabilize the yuan in the face of the carry unwind, it would effectively offset 60% of QE3 and put around 200 bps of upward pressure on 10Y yields. So in effect, China’s UST dumping is QE in reverse – and on a massive scale.

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Aug 27

Putin

Russia Refuses To Participate In Ukraine Debt Restructuring (ZeroHedge, Aug 27, 2015):

War-torn Ukraine has reportedly reached a restructuring deal with a group of creditors headed by Franklin Templeton, according to the country’s finance minister Natalie Jaresko. The terms of the agreement call for a 20% writedown and a reprofiling that includes a maturity extension of four years and an across-the-board 7.75% coupon. Vladimir Putin isn’t interested.

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Aug 25

Devaluation Stunner: China Has Dumped $100 Billion In Treasurys In The Past Two Weeks (ZeroHedge, Aug 25, 2015):

On August 11, China devalued its currency, and in the subsequent 3 days the onshore Yuan, the CNY, tumbled by some 4% against the dollar. Then, as if by magic, the CNY stabilized when China started intervening massively, only this time not through the fixing, but in the actual FX market.

This means that while China has previously been dumping reserves as a matter of FX policy, after August 11 it was intervening directly in the FX market, with the intervention said to really pick up after the FOMC Minutes on August 19, the same day the market finally topped out, and has tumbled into a correction since then. The result was the same: massive FX reserve liquidations to defend the currency one way or the other.

And yet something curious emerges when comparing the traditionally tight, and inverse, relationship between the S&P and the Treausry long-end: the tumble in stocks has not been anywhere near as profound as the jump in yields. In fact, the 30 Year is wider now than where it was the day China announced the Yuan devaluation.

20150825_30YSPXWO

Why is that?

We hinted at the answer on two occasions earlier (here and here) and yet the point is so critical, and was missed by virtually all readers, that it deserves to be repeated once again: as part of China’s devaluation and subsequent attempts to contain said devaluation, it has been purging foreign reserves at an epic pace. Said otherwise, China has sold an epic amount of Treasurys in the past two weeks.

How epic? We turn it over to SocGen once again: Continue reading »

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Aug 25

BrazilJobDestruction

Brazil’s flagging economy, which is mired in stagflation and remains a slave both to China and to what looks like intractable political turmoil, has destroyed nearly 550,000 jobs YTD. As Barclays notes, ” [the July] print is compatible with 140,939 job eliminations, pretty close to the historical low of -154,355 in June.”

In more ways than one (or two, or three) Brazil is the poster child for the global emerging market unwind that, thanks to China’s yuan devaluation, has accelerated dramatically over the course of the last week.

To be sure, the combination of slowing demand from China, the (now lower) possibility of a Fed rate hike, and, perhaps most importantly, the Continue reading »

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Aug 21

Paul-Krugman-Keynesians-Fail

You can’t make this stuff up!


–  Paul Krugman “What Ails The World Right Now Is That Governments Aren’t Deep Enough In Debt” (ZeroHedge, Aug 21, 2015):

This was written by a Nobel prize winning economist without a trace or sarcasm, irony or humor. It is excerpted, and presented without commentary.

From the NYT:

Debt Is Good

… the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt. Continue reading »

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Aug 19

More Trouble In Turkey As Lira Plunges To New Lows, Bond Yields Soar (ZeroHedge, Aug 18, 2015):

On Monday, Turkey’s lira plunged to new lows against the dollar as coalition talks between prime minister and AK Party leader Ahmet Davutoglu and nationalist MHP leader Devlet Bahceli broke down. The result, AKP won’t be able to form a coalition government after elections in June saw the party lose its parliamentary majority for the first time in 12 years.

In the absence of a coalition, the country will go back to the polls – likely in November – where President Recep Tayyip Erdogan hopes heightened violence between Ankara and the PKK will translate into a stronger showing for AKP.

The political turmoil, rising violence, and general EM malaise have hit the country’s currency hard and on Tuesday, Turkey’s central bank left rates unchanged prompting further weakness in the lira which had already fallen earlier in the session after Emine Nur Gunay, Davutoglu’s chief adviser, hinted that a rate hike was not in the cards.

20150818_TRY

Meanwhile, 10-year yields have spiked to their highest levels in nearly a year and a half. Continue reading »

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Aug 16

Yuan Devaluation Sparks Biggest Crash In US Corporate Bonds Since Lehman (ZeroHedge, Aug 16, 2015):

Just two days ago we warned of the dramatic disconnect between equity insurance and credit insurance markets – at levels last seen before Bear Stearns collapse. As the Yuan devaluation shuddered EURCNH carry traders and battered European assets, US equity markets stumbled onwards and upwards, impregnable in their fortitude with The Fed at their back no matter what. However, US corporate bond markets were a bloodbath…

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Aug 15

Dominos countries

“China, Australia, Brazil, Canada, Sweden – it is beyond us how anyone can declare the crisis isn’t spreading. Be prepared – there are going to be lots of opportunities to both make and lose money. But first, you have to recognize what is happening.”


The Crisis Is Spreading: China, Australia, Brazil, Canada, Sweden… (ZeroHedge, Aug 15, 2015):

Earlier today, we posted an excerpt from IceCap Asset Management’s latest letter to investors focusing on the farce that is the Greek bailout #3, which can be summarized simply by the following table…

greece next steps

… and Keith Dicker’s assessment which was that “for Greece, it’s mathematically impossible to repay its debt” and that the Greek “economy continues to plummet to deeper depths and is now -33% less than where it was in 2008.”

But the truth is that for all the endless drama, Dicker continues, “the Greek debt crisis isn’t THE crisis. Rather it is simply a symptom of a much larger global debt crisis.” Continue reading »

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Aug 15

angela-merkel

Study: Germany made €100bn profit on Greek crisis (Keep Talking Greece, Aug 10, 2015):

What? I don’t believe it! Rea-lly? Germany made a 100 billion euro profit on Greek crisis? No, kidding? HA! And yes, so it is! A study conducted by a German Economic Institute has shown that every time investors got bad news about Greece, they rushed to Germany’s ‘safe haven’ with the effect that the interest rates on German government bonds were falling!

“Greece’s biggest creditor Germany has made a huge profit on the country’s debt crisis over the last 5 years as it saved through lower interest payments on funds borrowed amid investor “flights to safety.”

Each time investors got bad news about Greece, they rushed to the ‘safe haven’ of Germany, with the interest rates on German government bonds falling, according to the study from the private, non-profit Leibniz Institute of Economic Research, Agence France-Presse reported Monday. Continue reading »

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Aug 08

It’s a controlled demolition.

WTC-7-collapse


Bernanke_normal

When A Train Wreck Is No Accident (International Man):

“In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet.” – Ron Paul

Never in history have the economic and political structures been so manipulated by those who are responsible for their safekeeping; never has so much been at stake, in so many countries, and facing collapse, all at the same time.

The great majority of people in the First World recognise that the world is passing through an economic crisis. However, most are under the impression that there are some pretty smart fellows running the show and all they need to do is tweak the system a bit more and we’ll return to happy days.

Not so. The “smart fellows” who are in charge of fixing the problem are in fact the very same people who created it. Continue reading »

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Aug 07

Surprised-baby


Here Comes The Next Crisis “Nobody Saw Coming” (ZeroHedge, Aug 7, 2015):

When borrowing become prohibitive (or impossible) and raising taxes no longer generates more revenues, state and local governments will have to cut expenditures.

Strangely enough, every easily foreseeable financial crisis is presented in the mainstream media as one that “nobody saw coming.” No doubt the crisis visible in these three charts will also fall into the “nobody saw it coming” category.

Take a look at this chart of state and local government debt. As we noted yesterday, nominal GDP rose about 77% since 2000. So state and local debt rose at double the rate of GDP. That is the definition of an unsustainable trend.

state-local-govt-debt8-15

As noted earlier in the week, state and local taxes have soared 75%. While this would be no big deal if wages and salaries had risen by 75% in the same time frame, but earnings have barely kept pace with inflation (38% since 2000). Continue reading »

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Aug 07

$60 Trillion Of World Debt In One Visualization (ZeroHedge, Aug 6, 2015):

Today’s visualization breaks down $59.7 trillion of world debt by country, as well as highlighting each country’s debt-to-GDP ratio using colour. The data comes from the IMF and only covers external government debt.  

It excludes the debt of country’s citizens and businesses, as well as unfunded liabilities which are not yet technically incurred yet. All figures are based on USD.

world-debt-60-trillion-infographic
Courtesy of: Visual Capitalist

The numbers that stand out the most, especially when comparing to the previous world economy graphic:

Continue reading »

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Aug 06

Emerging Market Mayhem: Gross Warns Of “Debacle” As Currencies, Bonds Collapse (ZeroHedge, Aug 6, 2015)

Things are getting downright scary in emerging markets as a “triple unwind” in credit, Chinese leverage, and loose US monetary policy wreaks havoc across the space. Between a prolonged slump in commodity prices and a structural shift towards weaker global trade, the situation could worsen materially going forward.

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Aug 06

Is This Country Latin America’s Next “Argentina” (ZeroHedge, Aug 6, 2015):

Today, following another spike in negative news, it appears that the credit markets have finally woken up, and a quick look at Brazil’s CDS shows that following today’s spike to 314bps, the country’s implied default risk is back to levels last seen in April of 2009! We expect more credit market participants to notice the depressionary developments in brazil, and as the country’s CDS continue to blow out, many will start asking themselves: is Brazil the next Argentina?

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Aug 06

Bad Debt Soars 35% In China As Government Set To Fabricate Dismal Loan Data (ZeroHedge, Aug 6, 2015):

 According to a transcript of an internal meeting of the China Banking Regulatory Commission, bad loans jumped CNY322.2 billion in H1 to CNY1.8 trillion, a 36% increase. Meanwhile, The PBoC will include loans made to CSF, China’s plunge protection vehicle, in its monthly loan data, meaning Beijing will pretend that the state-directed effort to artificially shore up the country’s stock market represents real, organic demand for credit.

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Aug 03

Puerto Rico broke

First Default By U.S. Commonwealth In History: Puerto Rico Fails To Make Required Debt Payment (ZeroHedge, Aug 3, 2015):

Over the weekend Puerto Rico was supposed to make a modest principal and interest payment of some $58 million due on Public Finance Corp. bonds, which however few expected would be satisfied. As a reminder, on Friday, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, said during a press conference in San Juan that the government simply does not have the money.

Moments ago Melba Acosta, president of the Government Development Bank, confirmed as much, when he announced that only $628,000 of the $58 million payment, or just about 1%, had been paid.

Below is the full statement from Acosta on the service of PFC Bonds: Continue reading »

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Aug 03

30Y Treasury Yield Plunges To 3-Month Lows As S&P Breaks Key Technical Support (ZeroHedge, Aug 3, 2015):

The carnage is contagious. The S&P 500 just broke down below its 50- and 100-day moving averages unable to hold the ubiquitous pre-EU-close ramp highs. Treasury yields have plunged since the weak spending and ISM data with the 5Y breaking below its 200-day moving average and 30Y yields testing 3-month lows

 …

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