Celebrating China's First Bond Default: Copper Limit Down, Yuan Crashes Most In Six Years

Tyler Durden's picture




 

It would appear the fecal matter is starting to come into contact with the rotating object in China. Worrying headlines are beginning to mount on the back of real economic events (an actual default and a collapse in exports):

  • *COPPER IN SHANGHAI FALLS BY 5% DAILY LIMIT TO 46,670 YUAN A TON
  • *CHINA YUAN WEAKENS 0.46% TO 6.1564 VS U.S. DOLLAR
  • *YUAN DROPS MOST SINCE 2008

Aside from that Iron ore prices are crumbling, Asian stocks are dropping, Chinese corporate bond prices aee falling at their fastest pace in almost 4 months, and all this as 7-day repo drops to one-year lows (as banks hoard liquidity).

 

Item #1: The forced unwind of massive rehypothecated copper lots related to concerns over shadow-banking defaults sparked by the fact that Chaori was allowed to actually default...

 

Pushing Shanghai copper limit down...

 

Item #2: Iron Ore prices collapsing for similar reasons (as borrowers rotated to Steel and by-products for collateral on their shadow bank lending facilities)...

 

Item #3: Corporate bond prices are dropping at their fastest in 4 months...

 

Item #4: Repo rates are at near-record lows as banks hoard liquidity...

 

Item #5: USDCNY is tumbling as PBOC efforts to unwind the massvley one-sided carry trade appear to be getting out of control...

 

Item #6: AsiaPac stocks are down by their most in almost 6 weeks...

 

Item #7: Even US equity futures are unhappy (with JPY carry having caught up and now dumping again)...

 

Bonus Item: Copper-to-Gold ratios are collapsing...

 

Charts: Bloomberg

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Sun, 03/09/2014 - 22:22 | 4529275 eddiebe
eddiebe's picture

The perfect excuse for China to start dumping T bonds.

Sun, 03/09/2014 - 22:24 | 4529284 johngaltfla
johngaltfla's picture

Badges? We don't need no stinkin' badges! Nor any damned excuse! Sell ya bitchez....

Sun, 03/09/2014 - 22:36 | 4529315 remain calm
remain calm's picture

Now I think it would be a nice jesture if Japan would extend China a loan. Lets all just hug and make-up.

Sun, 03/09/2014 - 22:43 | 4529327 PhilB
PhilB's picture

Lets not get carried away. While the fecal splatter is bound to hit a few, China holds 4 Trillion USD in reserve assets. Thats like what, 65% of Japans GDP alone. It will likely get ugly, but if anyone needs a loan its Japan (not to mentiom a good radioactive scrub down).

Sun, 03/09/2014 - 22:52 | 4529355 philipat
philipat's picture

Isn't this the way free markets are supposed to behave? You know, as in the weak fail. Those were the days!! And it takes "Communist China" to show how markets should work.

Sun, 03/09/2014 - 23:00 | 4529375 Obchelli
Obchelli's picture

Bullish M**er F***ers... Means US Futures will be more positive (positiver) than normal...

Sun, 03/09/2014 - 23:07 | 4529390 philipat
philipat's picture

Moar? Bitchez!!

Sun, 03/09/2014 - 23:11 | 4529401 LetThemEatRand
LetThemEatRand's picture

MIC and Fed printing are limit up.  That's what this is all about.

Sun, 03/09/2014 - 23:23 | 4529431 wintermute
wintermute's picture

I hadn't realised that the S&P 500 is tracking such a long straight line up.

Seems like it is almost artificial, like lots of money being printed every month, or something...

Sun, 03/09/2014 - 23:42 | 4529468 CrashisOptimistic
CrashisOptimistic's picture

Or HFT engines.

Sun, 03/09/2014 - 23:53 | 4529487 The Dunce
The Dunce's picture

China's not going anywhere.  Zerohedge has been talking their downfall sice the beginning of time.  Bitches.

Mon, 03/10/2014 - 00:02 | 4529505 LetThemEatRand
LetThemEatRand's picture

[toilet]Paper tiger.

Mon, 03/10/2014 - 07:02 | 4529763 Obchelli
Obchelli's picture

And futures are up based on F**G Nothing....

Mon, 03/10/2014 - 07:36 | 4529785 Notarocketscientist
Notarocketscientist's picture

Those bills will be worthless if China unloads in any volume. 

Sun, 03/09/2014 - 23:12 | 4529404 Groundhog Day
Groundhog Day's picture

who needs cooper when you have the carry trade

Sun, 03/09/2014 - 22:29 | 4529296 Seize Mars
Seize Mars's picture

no, they need the repo collateral as all other assets turn to shit

Sun, 03/09/2014 - 23:58 | 4529502 Renewable Life
Renewable Life's picture

All part of the plan, there are literally trillions in US and European debt, invested in China and it's infrastructure!!! China is going to let them suffer big and see what cockroaches survive and which ones die, then they'll blow the whistle when THEY want too, and trust me, it won't be until US politicians are on their fucking knees begging for mercy and pissing in their pants!

China knows suffering, America and Euro fools only know entitlement, this will be awesome to watch!!

Get the popcorn!

Mon, 03/10/2014 - 04:23 | 4529683 new game
new game's picture

i hope you are right as i too have endured pain to be where i'm at.

pain fuckers, some pain. turn the screws til last ozz of fluid flows til a drip...

mutha fuckers.

Sun, 03/09/2014 - 22:32 | 4529307 disabledvet
disabledvet's picture

more like a war over three uninhabited islands.
"Japan has a history of launching pre-emptive strikes" I might add.

China has already declared the border of North and South Korea a "red line."
Well...what if Japan and South Korea launch a coordinated strike on Pyonyang with the "limited aim of re-uniting the two Koreas"? How is that any different from Russia going into "Kiev Rus"?

Sun, 03/09/2014 - 22:44 | 4529334 TheReplacement
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That would apparently involve killing people, something Russia has yet to do.  Or so reports say.

Sun, 03/09/2014 - 23:21 | 4529426 RSDallas
RSDallas's picture

Or maybe just the perfect storm?

Sun, 03/09/2014 - 23:23 | 4529430 The Most Intere...
The Most Interesting Frog in the World's picture

Once the shit hits fan, would not be surprised if Fed could unload all of it's stash as well actually...  10 YR < 1%???

Sun, 03/09/2014 - 23:43 | 4529470 CrashisOptimistic
CrashisOptimistic's picture

The price would be very high then.  That would be when the Fed could get the most for the sale.

Sun, 03/09/2014 - 23:34 | 4529449 mendigo
mendigo's picture

Does that really make sense?

Or is it just fun to say?

Sun, 03/09/2014 - 23:41 | 4529465 CrashisOptimistic
CrashisOptimistic's picture

On the contrary, UST yields are down 2 bp on the news.  2.77%

When there is fear, there just is no question where the money goes.  It's not a matter of whether one likes it or not.  It's where the money goes when the economy is poor.  It's where the money goes when it is afraid.

 

Mon, 03/10/2014 - 04:54 | 4529706 jeff montanye
jeff montanye's picture

treasury yields rose from late 1929 to early 1932.  see sidney homer's "a history of interest rates".

Mon, 03/10/2014 - 00:41 | 4529553 Buck Johnson
Buck Johnson's picture

Remember China gets alot of their natural resources from Australia, this must be hitting them pretty hard also.

Mon, 03/10/2014 - 02:35 | 4529623 dow jones 20000
dow jones 20000's picture

one can only hope.

I love the fact that I've found a community that is so disturbed by the status quo that we get a little giddy when the poop starts to hit the blades.

I'm also a little drunk. I love you guys. 

Mon, 03/10/2014 - 02:37 | 4529626 CRBull
CRBull's picture

 

 

Dumping Treasuries in Concert with Russia of course....  

Mon, 03/10/2014 - 06:26 | 4529741 Wahooo
Wahooo's picture

Yup, flush the crap all at once. Plunge if needed.

Mon, 03/10/2014 - 06:46 | 4529751 USisCorrupt
USisCorrupt's picture

BitCoins are looking better and better by the day.

Sun, 03/09/2014 - 22:23 | 4529277 johngaltfla
johngaltfla's picture

But there is some good news despite this with the House of Saud deciding to abandon the US and favor Russia:

Is the Syrian Civil War Over?

Mon, 03/10/2014 - 00:16 | 4529462 LetThemEatRand
LetThemEatRand's picture

Funny that someone who seems to revere Ayn Rand would have an issue with the House of Saud.  They are ruthless users of the oil that was found under their land.  They drive the economy of billions of people with "their" oil.  They blow with the wind of whichever military will prevent the "takers" from taking what belongs to the current producers, the House of Saud.  They subjucate their people while producing wealth from happenstance, and rule from palaces by force without elections.  But they took it fair and square and now it belongs to them.   Seems like a Rand dream.   

Sun, 03/09/2014 - 22:31 | 4529278 TruthInSunshine
TruthInSunshine's picture

By the time you feel the effects of this crash, you will pray that you white knuckle'd your cash, & stacked at least a modest stash.

This is Lehman x 1000.

Somewhere, Bernanke is thanking his lucky stars he is no longer in the hot seat, as the fire he started (with his fellow Central Banking Criminals - INCLUDING THOSE AT THE PBOC, WORD) burns out of control.

Sun, 03/09/2014 - 22:32 | 4529305 maskone909
maskone909's picture

Im mclovin it. Hope this is the one

Sun, 03/09/2014 - 22:52 | 4529317 TruthInSunshine
TruthInSunshine's picture

By the way, an important point - The Chinese Government ABSOLUTELY NEEDS TO DRAMATICALLY DEBASE THE YUAN (good luck to any other government telling them they "can't manipulate their currency" DOWNWARD now) if they have ANY hope to manage the crisis they now face for reasons of controlling the damage of the bad debt tsunami about to roll over their mainland, not to mention that China is an export-intense economy.

Sun, 03/09/2014 - 23:11 | 4529400 philipat
philipat's picture

Or, to quote Bernanke; "It was OK when I left".

That's also what Greenspan said. Might get intersting for Yellen with the Fed Balance sheet already heading for $5 Trillion this year even with a complete taper?

Sun, 03/09/2014 - 23:27 | 4529437 walküre
walküre's picture

Liking your outlook for cash at hand. If we'll see a deflationary correction, cash will be king.

As for China though, they don't own enough energy related assets yet. Their currency is shit anyway but everyone looked the other way and took Mao's paper at face value. At least they bought US paper and kept us alive. If they're debasing Yuan now massively, they can't afford to import the resources needed to keep the lights on unless price of oil goes down alot.

Maybe oil collapsing to $50 can jumpstart the global economy. In conjunction with a huge debt writeoff.

Sun, 03/09/2014 - 23:49 | 4529475 TruthInSunshine
TruthInSunshine's picture

They'll cut subsidization of energy prices further and the citizenry will cut back in much of what they were just beginning to enjoy over the last decade.

It's not only not a problem for them, but they've already been conditioned to prepare for a lifestyle downsizing by their central planners, and there is a realization on the part of the citizenry that their export-intense economy is already beginning to crumble as recent trade balances have proven.

Chinese military & Chinese producers are joined at the hip, and production of goods is far and away the largest sector of employment in China.

Moreover, as mentioned previously, China literally can't contain what is alone a disaster, and prevent it from sinking their economy entirely, if they don't dramatically crush the Yuan so as to try and limit the extent, depth & duration that debt defaults do to their economy.

Sun, 03/09/2014 - 23:55 | 4529494 CrashisOptimistic
CrashisOptimistic's picture

Oil is not what it used to be.  Wells used to flow for decades.  That's not so anymore.  Output crashes in a month and even more the first year.

If oil's price fell to $60, scarcity would be absolutely immediate.  The price would spike within a week or two.  That's why it has been so steady 95-105.  The control feedback loop is very high gain.

So that impetus isn't going to come.

Mon, 03/10/2014 - 02:11 | 4529612 walküre
walküre's picture

In my scenario $50 next year is like $200 by years end. Reset. Cut off a few zeroes, new balls and everyone can play again.

Mon, 03/10/2014 - 04:44 | 4529696 new game
new game's picture

85 is limit down, end of story. cost of oil average. just like gold at 1200/oz.

these are benchmarks, like the word written. below is a serious problem that you should NOT be hoping for uless you like to see blood...

Mon, 03/10/2014 - 04:39 | 4529691 new game
new game's picture

101 % cash*

*=.01 roi

Sun, 03/09/2014 - 23:51 | 4529482 holdbuysell
holdbuysell's picture

Spot on.

The FSA will be celebrating this newly found buying power at the expense of more wealth leaving the country through the trade deficit. If the FSA only knew.

And it also means moar Yellen printing to keep pace in the escalating currency wars.

What inning is this? 7th?

Sun, 03/09/2014 - 23:12 | 4529402 Obchelli
Obchelli's picture

If this was one futures would be limit down by now...  I can assure you they will be green in the morning or by EOD. "Misterious buyer" will put market order to buy futures before market and 3:30

Sun, 03/09/2014 - 23:14 | 4529411 LetThemEatRand
LetThemEatRand's picture

As ZH loves to say, it's (not) different this time.

Sun, 03/09/2014 - 23:57 | 4529499 CrashisOptimistic
CrashisOptimistic's picture

You guys just have to understand.

There is no market.  If the system is threatened, the CBs of all the countries will conference call and it will be fixed immediately.  There is no more moral hazard because how can a meaningless substance have any morality associated with it.  When you print something from thin air, it's meaningless.

Mon, 03/10/2014 - 04:47 | 4529697 new game
new game's picture

just like what happened when the ten was threatened at 3 plus. buy mutha fuk'r BUY!

Sun, 03/09/2014 - 22:24 | 4529282 erg
erg's picture

"Dr. Copper to the emergency room, Dr. Copper to the emergency room."

You'll be working with Dr. Nick.

Sun, 03/09/2014 - 23:32 | 4529446 THX 1178
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Hi Everybody!

Do NOT follow this link or you will be banned from the site!