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3 Central Bank Shocks Unleash Overnight Yield Crash, With Yuan On Verge Of Collapse

August 7, 2019

3 Central Bank Shocks Unleash Overnight Yield Crash, With Yuan On Verge Of Collapse

There is just one way to describe the plunge in bond yields overnight and the events behind it: the global race to the currency bottom is rapidly accelerating in its final lap with a global deflationary Ice Age (take a bow Albert Edwards) waiting on the other side.

The main event, of course, was the latest yuan fixing with the PBOC showing a clear sense of humor when it set the currency at 6.9996, laughably not to be confused with 7.0000 (for at least another 24 hours that is), but just a fraction of a percent away from the critical threshold, and weaker than the 6.9977 expected. The result was a resumption in the offshore yuan selloff, a hit to US equity futures and a drop in Treasury yields. Of course, once the PBOC does finally fix the yuan on the wrong side of 7, all bets are off and watch as the CNH crashes… as far as 7.70 according to SocGen, especially once Trump hikes tariffs to 25%.

But there was much more in today’s iteration of the global race to the currency bottom, when first New Zealand, then India and finally Thailand shocked investors by being far more dovish than analysts expected. Indeed, the three Asian central banks delivered surprise interest-rate decisions on Wednesday as central bankers not only took aggressive action to counter a worsening global economy, but are now frontrunning each other – and the Fed – in doing so.

As noted last night, New Zealand’s central bank on Wednesday stunned investors by dropping its benchmark rate by 50 basis points, double the expected reduction and sending the kiwi tumbling. Thailand also surprised all but two in a survey of economists, cutting by 25 basis points. Finally, India’s central bank lowered its rate by an unconventional 35 basis points.

 …click on the above link to read the rest of the article…

China’s Economic Slump Accelerated In October, Early Indicators Show

October 29, 2018

China’s Economic Slump Accelerated In October, Early Indicators Show

As corporate defaults surge, forcing a desperate PBOC to reverse its deleveraging efforts and threaten more interventions to stave off a more serious retrenchment in growth in the world’s second largest economy, it seems like not a day goes by without another warning sign that China’s economic precarious situation is even worse than we thought.

The impact this has had on the mainland investors’ psyche has been obvious to all. Repeated interventions by China’s ‘National Team’ have done little to arrest the inexorable decline in mainland stocks in October, leaving the Shanghai Composite, the country’s main benchmark index, on track for one of its worst months since the financial crisis, and its worst year since 2011. Meanwhile, a flood of FX outflows has pushed the Chinese yuan dangerously close to the 7 yuan-to-the dollar threshold which, if breached, could unleash another wave of chaos across global markets.

And as Chinese policy makers are probably already scrambling to pad the official stats, Bloomberg has released its own proprietary preliminary gauge of Chinese GDP in October which showed that the slowdown unleashed by the US-China trade war worsened in October.

China

The Bloomberg Economics gauge aggregates the earliest-available indicators on business conditions and market sentiment, and unequivocally affirmed that the Communist Party’s efforts to stabilize the country’s economy and markets – the party this month introduced a raft of measures to stabilize sentiment, including steps to boost liquidity in the financial system, new tax deductions for households and targeted measures aimed at helping exporters – haven’t been successful – at least not yet.

BBG

Kyle Bass and the other prominent China bears across the US hedge fund community will be pleased to see the latest early indicator from Bloomberg, which suggests that economic growth in China remained (relatively) sluggish in October after slowing to its weakest level since the crisis during the third quarter.

…click on the above link to read the rest of the article…

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