Dow futures are down over 170 points from the cash close, testing the lows of the day following carnage in the Chinese currency markets. Despite the biggest drop in onshore Yuan since August devaluation, Offshore Yuan has collapsed to its lowest since September 2010. What is more worrisome (or positive for Kyle Bass [6]) is that the spread between onshore and offshore Yuan has blown out to 1250 pips - a record - indicating dramatic outflows and/or expectations of further devaluation to come.
Yuan is in free-fall... Offshore Yuan is down over 400 pips from intraday highs, testing 6.6800
[7]
CNH-CNY spread is now over 1320 pips - as it appears The PBOC is losing control.
And although Chinese stocks are "stable" thanks to some National Team play...
[8]
US equity futures are tumbling off the bounce close, trading back near the day's lows...
[9]
It appears Kyle Bass was right:
"Given our views on credit contraction in Asia, and in China in particular, let's say they are going to go through a banking loss cycle like we went through during the Great Financial Crisis, there's one thing that is going to happen: China is going to have to dramatically devalue its currency."
And it is - sanctioned by The IMF...
[10]
Charts: Bloomberg
