The framing is a bit clumsy, but the latest data in favor of the artificial CNY surge comes to us from Bloomberg. The mainstream views currency flows as, well, flows of currency. That’s what makes their description so maladroit, and it can often lead to serious confusion. A little translation into the wholesale eurodollar reality, however, clears it up nicely. [...]
Given that today started with a review of the “dollar” globally as represented by TIC figures and how that is playing into China’s circumstances, it would only be fitting to end it with a more complete examination of those. We know that the eurodollar system is constraining Chinese monetary conditions, but all through this year the PBOC has approached that [...]
The People’s Bank of China reported this week that its holdings of foreign assets fell slightly again in August 2017. Down about RMB 21 billion, almost identical to the RMB 22 billion decline in July, the pace of forex withdrawals is clearly much preferable to what China’s central bank experienced (intentionally or not) late last year at ten and even [...]
Eleven days ago, we asked a question about Treasury bills and haircuts. Specifically, we wanted to know if the spike in the 4-week bill’s equivalent yield was enough to trigger haircut adjustments, and therefore disrupt the collateral chain downstream. Within two days of that move in bills, the GC market for UST 10s had gone insane. To be honest, it [...]
All the way back in January I calculated the total size of China’s 2016 fiscal “stimulus.” Starting in January 2016, authorities conducted what was an enormous spending program. As it had twice before, the government directed increased “investment” from State-owned Enterprises (SOE). By my back-of-the-envelope numbers, the scale of this fiscal side program was about RMB 1.45 trillion, or nearly [...]
As much as officials in Beijing may outwardly fight it, they are still in the “dollar” business. It’s not raw conjecture, either. Though we don’t know the specifics of their policy positions, in this context we don’t need to know them; it’s all right there on the central bank balance sheet. The most prominent thing about China right now is [...]
It's hard not to put all emphasis on missile tests and other serious forms of sabre rattling. Even doing so, as the bond market may be doing right now, however, misses the underlying. Everything at the moment traces back to mid-March, which in hindsight was a very eventful month in full far away from the Korean peninsula. Take, for example, [...]
In Ian Fleming’s 1959 spy novel Goldfinger, he makes mention of the Moscow Rules. These were rules-of-thumb for clandestine agents working during the Cold War in the Soviet capital, a notoriously difficult assignment. Among the quips included in the catalog were, “everyone is potentially under opposition control” and “do not harass the opposition.” Fleming’s book added another, “Once is an [...]
The world of eurodollars is always going to be hidden. What goes on, really goes on, often sees no light of day. The most basic financing transactions are typically bilateral, meaning that the only people who really know the terms and the reasons are the two counterparties engaged. That is also true if one of those counterparties just happens to [...]
Copper prices are up very sharply today, igniting across markets a reborn “reflation.” Treasuries along with eurodollar futures have been stuck in anti-“reflation” for quite some time. Copper, on the other hand, is not just now breaking from the pack. Going back to May 9, this important economic indication has been so far steadily bucking the trend. When we talk [...]
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