The amount of liquidity being added to the big Chinese banks has been astounding. The vast majority of it is coming from the PBOC itself. In July 2015, just before everything broke, PBOC funding of the Big 4 State-Owned Banks was less than RMB 100 billion. As of the latest figures for December 2016, it was RMB 1.17 trillion. In [...]
November was the month where global bonds, particularly sovereign bonds, were routed in synchronized liquidation. As such, we would expect to find among various data sources evidence to suggest a monetary “dollar” background consistent with that fact. What that has meant in the months (and last several years) leading up to it was the foreign official sector in overdrive “selling [...]
China’s big problem can be succinctly described as where Economics met economics. Capital “E” Economics pushed authorities to over-financialize China in response to the Great “Recession”, which China’s government was only too enthusiastic to do even though its monetary regime at the PBOC better understood what was at the time happening than any of the central bankers in the West [...]
The Chinese have been undergoing quite a bit of stress lately, with markets including stocks more likely to be in turmoil than not. In fixed income, the Finance Ministry was slightly shaken by a failed auction today, its first since summer 2015. Yesterday, government bond futures trading had to be suspended when the 10s and 5s experienced their largest drop [...]
Rumors persisted in China of new foreign currency restrictions from state authorities now trying to crack down on corporate activity. The story was picked up in many news outlets all over the world, but will remain unconfirmed as it is based on reports from the South China Morning Post and others inside the country that have only claimed to have [...]
Before October 1997, what would become known as the Asian flu was just another opportunity for the mainstream to dismiss what many people, including many prominent, competent people, had been warning about for years before. The usual refrain thrown back at them was some form of “you are missing out.” People, of course, never really learn from these episodes because [...]
After sticking around 53 bps since the middle of September, 1-month LIBOR has jumped almost 7 bps since November 11 to register above 60 bps for the first time in years. With the December 2016 FOMC meeting fast approaching, it is quite natural to assume eurodollar markets are picking up what has been “hawkishness” over recent weeks. This would be [...]
That the repo market, as noted yesterday, has been beset by a persistent collateral shortage is relatively uncontroversial. Where once large blocks of MBS tranches were central to interbank flow and funding, their absence is still a fact of operation though that repudiation was a very long time ago. Even with that backdrop, however, it doesn’t explain a whole lot [...]
With money market reform (2a7) more than a month in the rear view, LIBOR rates continue to rise regardless. Three-month LIBOR jumped to 91.622 bps Friday, up from 88.4 bps to begin the month of November. The 1-year maturity is now well over 160 bps, up more than 100 bps going back to November 2014. Since 2a7 is behind us, [...]
The Treasury Department’s Treasury International Custody (TIC) estimates for September were released, and though I wish they were timelier they do typically confirm what we suspect about the months at each update. There were negatives all over this latest month, including private flows, which would fit the overall narrative where Chinese money markets were all over the place and repo [...]
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