“The average man doesn’t wish to be told that it is a bull or a bear market. What he desires is to be told specifically which particular stock to buy or sell. He wants to get something for nothing. He does not wish to work. He doesn’t even wish to have to think.”
On August 31, in what was dubbed a "historic event", the World Bank became the first issuer of bonds denominated in SDR and settled in yuan when it sold 500 million SDR units worth of bonds in China. Then, overnight, in yet another historic event, Standard Chartered Bank said it has obtained approval from the PBOC to be the first commercial issuer of bonds denominated in SDRs in China’s interbank bond market.
"...debt is simply everywhere, at least to the extent we can see and measure it. Corporate and sovereign debt, of both the developed world and emerging market varieties, are at record levels. China’s debts certainly add to that record but who really knows to what extent? It’s the ultimate black box of leverage on Planet Earth... You cannot NOT worry about the Fed in this world...The simple truth is ending reinvestment would bring the bond market to its knees.”
One day after a slump in Chinese trade sparked a global market selloff on concerns the world's second biggest economy had once again hit a downward inflection point, overnight China surprised once again, this time to the upside when the latest inflationary data printed hotter than expected, sending European and Asian stocks higher and pushing the yen lower after China’s producer price index rose for the first time since March 2012.
Remember Ray Dalio's warning from early 2016 that if assets remain correlated and things continue to move in the “wrong” direction, "there’ll be a depression"? Well, this is where we are now courtesy of the latest observations of Citi's Matt King...
The chaos that will arise as trillions of dollars, yen, yuan and euros, etc. try to crowd through the fire exits as the asset bubbles pop will be monumental, and the spikes in small asset class prices as the hot money floods in will be equally monumental.
While much attention in recent weeks has fallen on Deutsche Bank's balance sheet, today we got a timely reminder that the bank also has substantial income statement problems when Bloomberg reported that the biggest German lender is implementing a companywide hiring freeze as CEO John Cryan "seeks to lower costs and shore up investor confidence."
Remember when two weeks ago the China Beige Book warned that "It’s A Lot More Negative Than People Think" in the world's second biggest economy? Well after months of complacency about the Chinese economy and financial risks emanating from its $35 trillion financial sector, overnight the world got a rude awakening when China export figures tumbled, signalling a deeper slowdown than many anticipated just as the Fed prepares to raise interest rates.
"Let's not get too far ahead of ourselves," warned an uncited ECB rate-setting source. Reuters reports the European Central Bank may discuss technical changes to its asset-buying scheme next week but a decision could be deferred until December when the bank will also decide whether to extend the scheme beyond March.
Following the stronger than expected 3Y auction, moments ago the US Treasury completed today's second bond auction, when it sold $20 billion in 10Y paper, which priced "on the screws" at 1.793%, or right on top of the When Issued, and modestly above September's 1.699%. Just like in today's earlier auction, the Bid to Cover rebounded to 2.53 from last month's 2.35.