Nomura

Apparently fed up with the persistent spread between the onshore and offshore yuan, China has decided to add one more spinning plate to its collection by intervening in the offshore spot market.

• All surveyed analysts expect the Bank of England to keep monetary policy unchanged, with the bank rate at 0.5% and the Asset Purchase Facility at GBP 375bln
• Headline UK CPI printed at 0.1% for July, still well below the BoE’s mandated 2% target
• The accompanying minutes release is expected to once again show an 8-1 vote split in favour of keeping rates on hold

• Global stocks rally as investors scent fresh stimulus (Reuters)
• Japan's Nikkei 225 Rises 7.7% for Biggest Gain Since October 2008 (BBG)
• China's Stocks Advance for Second Day Amid Stimulus Speculation (BBG)
• Abe Pledges Corporate Tax Cut as Investments Slump (BBG)
• U.S. to shift 50 staff to boost office handling Clinton emails (Reuters)
• Chinese Premier Li Keqiang Says China Doesn't Want a Currency War (BBG)
• One Thing China Got Right (BBG)

Liar loans are back from the dead which means that if you look under the hood, you might just have a shoddy credit or two hiding in the collateral pool of your triple-A mortgage-backed paper. Meanwhile, in a further sign that we've learned nothing since the crisis, non-Agency RMBS is set to stage a comeback.

Today, in the first official criminal action following the Litvak bust from 2013, the SEC confirmed that our assessment was indeed spot on after the regulator announced fraud charges against three traders "accused of repeatedly lying to customers relying on them for honest and accurate pricing information about residential mortgage-backed securities (RMBS)." In the complaint, the SEC alleges that traders  misrepresented the bids and offers being provided to Nomura for RMBS as well as the prices at which Nomura bought and sold RMBS and the spreads the firm earned intermediating RMBS trades.  They also trained, coached, and directed junior traders at the firm to engage in the same misconduct.

The centrally-planned house of cards is finally starting to shake uncontrollably.

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."

The last three times inflation expectations tumbled this low, the Fed was about to launch QE1, QE2, Operation Twist and QE3.

In the aftermath of China's worst manufacturing PMI since the financial crisis, which in turn sent the Shanghai Composite crashing to the "hard floor" level of 3500, below which the PBOC and Beijing officially are seen as having lost control, virtually every China expert and strategist rushed to defend China's policymakers (and its stock market) with predictions that an RRR cut as large as 100 bps is imminent, and would take place as soon as this weekend, a much-needed move to calm nerves that China is in control. it did not.

The $64,000,000,000,000 question: what does the Fed now do? One attempt at an explanation taking into account last week's market plunge comes from Nomura, which provides a "2015 Scenario Analysis" in which it "breaks down various monetary policy (rate hike options) and rates market implications ahead."

PBoC Injection Shows China Worries About Outflows- WSJ

"Losses on car loans taken out by bad-credit borrowers are continuing to climb. What's driving the rise? Nomura has an idea."

Earlier today, Bloomberg TV blasted an amusing snippet from an article that was based on some deep revelations about what is happening in the bond market: It says: "China sells $180 billion of US Treasuries but no one notices." Which is ironic considering the following ZH headlines:

May 18: Revealing The Identity Of The Mystery "Belgian" Buyer Of US Treasurys
June 15: China Dumps Record $120 Billion In US Treasurys In Two Month Via Belgium
July 17: China Dumps Record $143 Billion In US Treasurys In Three Months Via Belgium
and of course July 22: "China's Record Dumping Of US Treasuries Leaves Goldman Speechless"

We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history. Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. Deflation and depression are mutually reinforcing, meaning the downward spiral will continue for many years. China is the biggest domino about to fall, and from a great height as well, threatening to flatten everything in its path on the way down. This is the beginning of a New World Disorder…

This charmed circle includes Google, Amazon, Baidu, Facebook, Saleforce.com, Netflix, Pandora, Tesla, LinkedIn, ServiceNow, Splunk, Workday, Ylep, Priceline, QLIK Technologies and Yandex. Taken altogether, their market cap clocked in at $1.3 trillion on Friday. That compares to just $21 billion of LTM net income for the entire index combined. The talking heads, of course, would urge not to be troubled. After all, what’s a 61X trailing PE among today’s leading tech growth companies?