China has a window from now to President-elect Donald Trump’s inauguration to halt FX intervention and let yuan depreciate to its equilibrium level, Yu Yongding, a former academic member of PBOC’s monetary policy committee, said, providing one possible explanation for bitcoin's 20% surge in the past week.
In what seems a remarkably quick and aggressive response to 'fake news' in a data feed, China's central bank issued a statement slamming "irresponsible media" reports that the onshore Yuan rate broke the "psychological threshold" of 7.00/$. The 6 handle flash-crash was not seen in offshore rates and has been removed from FX feeds since...
Global markets continued their levitation with the UK returning from vacation, pushing the MSCI Asia Pacific Index higher for the first time in seven days, while oil headed for the longest winning streak in almost seven years ahead of the promised OPEC production cut which is set to begin in just days. The USDJPY rose for a second day, pushing US equity futures higher and the DJIA is once again teasing with the 20,000 mark.
The core thread of next year's relatively downbeat "surprises" from Seabreeze Partners' Doug Kass is that the crowd is wearing Trump-colored glasses and that the single-biggest surprise is how quickly the bloom comes off the Trump flower.
While traders around the world slept, China's banking system suffered another mini cardiac arrest when the overnight repo rate traded on Shanghai Stock Exchange soared as much as 30.87% to 33%, the highest since September 29, before closing at 18.55%.
The last 5 days have seen Bitcoin prices (in dollars) soar over 18% and over 20% in Yuan as volumes on Chinese exchanges continues to build, seemingly anticipating notable Yuan devaluation (confirmed by various derivative bets being placed on the Chinese currency) and/or further capital controls looming as yet another hot money Chinese bubble explodes in commodity-land.
The fate of a defaulted $45 million Chinese corporate bond sold through an Alibaba-backed online WMP and belonging to the telecom company of one of China's biggest billionaires, was thrown into doubt on Monday, after a bank said letters of guarantee for the bonds were counterfeit, suggesting an entirely new "finance scare" is emerging in China.
The boom turns to bust as the Eurodollar market breaks. If the cycle gets out of hand, as it did from 2008 onwards, banking solvency is not only limited to local emerging market banks, but to the international banking community at large. This is exactly where we are at now and if history repeats itself, which we believe it will, a new financial crisis is brewing just under the surface as the dollar moves into its second leg.
With most global market closed for Christmas holiday, and traders taking the day and the week off, global stocks traded mixed in thin, subdued conditions. Japanese shares fell as the yen gained against the dollar for the fourth straight day after the release of BOJ Minutes and a Kuroda speech, while Chinese equities recovered from earlier losses.
Assuming Deutsche Bank is correct, the result would be the scariest forecast bond bulls have seen in years: a 10-Year TSY whose yield fades all gains attained during the past decade, in the span of just two short years, hitting 4.5% in early 2019. The adverse implications from such a fast, steep move on all asset classes, not just bonds, would be devastating.
"Beijing will increase controls on the property market to maintain stable home prices in 2017, said a statement issued after a plenary session of the Beijing Municipal Committee of the Communist Party of China on Saturday. Housing prices in the capital are already too high and ensuing increased social tension brings enormous challenges to ... stability in the city."
With fears mounting over China's debt load sustainability, and amid yet another liquidity crisis, President Xi Jinping appeared to admit that China's economic growth will slow below the government’s 6.5% target. Despite the promise of creating a "modestly prosperous society," Xi warned that China doesn’t need to meet the objective if doing so creates too much risk - a little late for that after trillions of freshly created credit was spewed into zombified firms this year - but at least reality is starting to set in.
For the 3rd night in a row, China opens with a panic bid for Bitcoin. The cryptocurrency is now up over 14% in less than 3 days, topping $900 for the first time since December 2013. Interestingly yuan is not moving much tonight.