Difference between revisions of "Credit Bubble Bulletin 091915"

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<br />The midcaps fell 1.1%, and the small cap Russell 2000 declined 1.0%. With Macy’s earnings badly missing estimates, retail stocks came under heavy selling pressure. The iShares Russell 2000 ETF… November 3 - Reuters (Helen Reid): “Emerging markets will see net capital outflows in 2017 for the fourth year in a row but the projected outflows of $206 billion will be much less than the $373 billion expected this year, the Institute for International Finance said… Like all things too good to last, capital markets have come to chew the fat off this remarkable record… It’s not that surprising that President Trump’s firing of FBI Director Comey had a much greater impact within the media than in the markets. Securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements… May 16 - New York Times (Nicole Perlroth and David E. Sanger): “Intelligence officials and private security experts say that new digital clues point to North Korean-linked hackers as likely suspects in the sweeping ransomware attacks that have crippled computer systems around the world.<br /><br />So as Fed officials talk up the possibility of unwinding the central bank’s crisis-era bond holdings later this year, figuring out what will happen when the U.S. After the MSCI Emerging Market Index’s surge of about 17% this year, momentum indicators suggest the rally is losing steam. In the first half of this year, Brazil’s industrial production dropped 6.3%, according to the country’s statistical bureau, the IBGE. Total Checkable Deposits dropped $27.8bn, while Savings Deposits jumped $41.3bn. The S&amp;P500 declined 0.3%, while the broader indices were weaker. It's never declined faster than it did last month. The last time Japan strung together this many quarters of growth was in 2006… Credit growth since 2008. Q3 seasonally-adjusted and annualized (SAAR) Non-financial Credit growth reached $2.679 TN (about $2.375 TN SAAR over three quarters) the strongest expansion since 2007’s record $2.503 TN. September 15 - Reuters (Paul Carrel): “European Central Bank policymaker Jens Weidmann took aim at the ECB's monetary stimulus in a German newspaper interview, saying a loose policy stance cannot support sustained growth and creates risks over time. December 7 - Reuters (Leika Kihara): “Bank of Japan Deputy Governor Kikuo Iwata said the central bank has not shifted its focus away from the pace of money printing, contradicting the governor's view and exposing a rift in the board on how best to break the country's deflation shackles.<br /><br />There were a number of articles discussing the VIX’s “lowest closing price since 1993.” There was the typical focus on a stable U.S. May 16 - Wall Street Journal (Min Zeng): “The U.S. May 15 - Bloomberg (Patricia Laya): “More confidence among U.S. May 18 - Bloomberg (Shahien Nasiripour): “Student debt has more than tripled as a share of total debt owed by U.S. In more recent years, cybersecurity experts say, the North Koreans have spread these agents across the border into China and other Asian countries to help cloak their identities. A lower currency could also spell trouble for customers in China who have borrowed US dollars or euros but are earning renminbi - the ‘classic FX mismatch,’ in the words of Keith Pogson, senior partner of EY’s Asia-Pacific financial services team. Growing another 16.5% during 2016, China now takes claim to the third-largest global bond market. Markets demand that the Bank of Japan turns crazy reckless, even as evidence mounts that now routine reckless hasn’t worked. That sum is now about $1.3 trillion, or about 10.6% of all U.S. U.S. equites came under modest selling pressure. May 16 - Reuters (Leika Kihara): “Bank of Japan Governor Haruhiko Kuroda said he was ‘quite sure’ the central bank could smoothly exit from its massive monetary stimulus when the appropriate time to do so came.<br /><br />Banking regulators have been trying for more than two years to curb excessive risk-taking by Wall Street’s biggest lenders as they seek to limit bank exposure to loans made to heavily indebted companies. More than a decade on, the Tren Urbano is a monument to the folly, bloat and abuse that finally bankrupted Puerto Rico. January 30 - Reuters: “Puerto Rico on Friday presented a plan to creditors that asks them to take a deep discount on their debt - an aggregate of around 45%, two sources familiar with the situation said, as the debt-ridden island tries to pull itself out of fiscal crisis. The Federal Reserve has been determined to paint the 2008 crisis as a consequence of poor lending standards. Interviews with Fed officials, and public statements they've made suggest the Fed's new normalized balance sheet could end up being three times as large as it was before the financial crisis. The Fed has yet to announce a plan to run off its massive $4.4 trillion balance sheet, but market participants… Total U.S. household debt was $12.73 trillion at the end of the first quarter of 2017, up $473 billion from a year ago, according to a Federal Reserve Bank of New York survey…<br /><br />Securities from higher-rated nations climbed as investor uneasiness about Deutsche Bank AG’s financial footing sparked demand for the safest assets at the expense of those from more indebted nations. [https://www.vvip96.net/great-wall-99/ greatwall99] improving global economy, robust corporate profitability, ample central bank stimulus even as U.S. May 15 - Bloomberg (Susanne Barton): “Expectations for another boost in U.S. May 15 - Wall Street Journal (Laura Kusisto): “Home sales in the first quarter hit their fastest pace in a decade, a sign that rising prices and slightly higher mortgage rates haven’t deterred home buyers from rushing into the market. May 15 - Bloomberg (Gareth Allan and Shingo Kawamoto): “Earnings reports by Japan’s three megabanks on Monday pointed to a fourth straight fall in combined annual profit, even as the impact of negative interest rates begins to ease. Monday from Bloomberg (Samuel Potter): “U.S. May 17 - Bloomberg (Gabrielle Coppola): “Lenders are tightening the spigot on new auto loans, making it harder for U.S. President-elect Donald Trump may make good on his threats to take punitive measures on China’s exports. S&amp;P Global Ratings reduced its credit rating on Jiangsu NewHeadline Development Group, a construction services provider and one of the largest financing firms owned by Lianyungang City -- in China’s eastern Jiangsu province…
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<br />Government bond markets across the single-currency bloc have been hurt in recent weeks by optimism over a U.S.-China trade deal and signs of stabilisation in economic data. [https://www.vvip96.net/great-wall-99/ great wall 99] - Reuters (Dhara Ranasinghe and Yoruk Bahceli): “A selloff in southern European bond markets gathered pace on Monday, pushing yields higher, with an inconclusive election in Spain adding to uncertainty in its bond market. European Commission President Jean-Claude Juncker reiterated the EU’s refusal to renegotiate as many of the Conservative Party candidates vying to replace Prime Minister Theresa May said they would seek a new agreement. May 24 - Bloomberg (Jana Randow, Alessandro Speciale, and Piotr Skolimowski): “Mario Draghi is leading a push to stamp out any speculation that the European Central Bank might raise interest rates before it ends quantitative easing. China spell out how it plans to reach as much as $50 billion in agricultural imports annually has become a sticking point in negotiations on a phase one trade deal, according to people familiar with the matter. November 12 - Bloomberg (Sarah Ponczek): “Some of the hottest trades of a tumultuous 2019 are falling out of favor as investors dip their toes into riskier waters. From low-volatility stocks to bonds and gold, the safety trade that reigned among exchange-traded fund investors is unraveling on signs of a rebounding economy and progress in U.S.-China talks.<br /><br />U.S.-based exchange-traded funds have racked up a record $4 trillion in assets under management as of this year, with 136 ETF providers offering 2,062 ETFs to investors… Yet is does have the potential to be the beginning of something important. In aggregate, ETFs tracking stocks that swing less than the broader market have taken in over $22 billion for a record year… And to have a central bank assume the role of savior for an ill-conceived monetary union guarantees precarious runaway monetary inflation. After refitting its tool kit in September, the central bank opted Tuesday to leave policy unchanged, despite sharply cutting its inflation forecasts. April 28 - Bloomberg: “China’s central bank is considering expanding a new lending tool in an effort to bolster demand for local-government bonds, as policy makers seek to develop a municipal debt market and avoid a credit crunch. Again, I don’t want to read too much into October’s abrupt lending slowdown. Most importantly, a surge in state-directed lending saw Total Social Financing jump an incredible $525bn in January, spurring what would be a record $1.5 TN of first-half Credit growth - and full-year 2016 Credit expansion approaching an unmatched $3.0 TN. Total Commercial Paper added $11.0bn to $1.131 TN.<br /><br />By early-2007, pricing for a rising mountain of subprime mortgage paper had nowhere to go but down. Freddie Mac 30-year fixed mortgage rates rose six bps to a near four-year high 4.38% (up 23bps y-o-y). Japanese 10-year &quot;JGB&quot; yields slipped two bps to negative 0.07% (down 7bps y-t-d). For the week on the upside, the New Zealand dollar increased 1.2%, the South African rand 1.0%, the British pound 1.0%, the Swiss franc 0.8%, the Swedish krona 0.6%, the Norwegian krone 0.4%, the Japanese yen 0.4%, and the euro 0.3%. On the downside, the South Korean won declined 0.8%, the Australian dollar 0.7%, the Brazilian real 0.5%, the Mexican peso 0.4%, and the Singapore dollar 0.1%. The Chinese renminbi declined 0.17% versus the dollar this week (down 1.85% y-t-d). The U.S. dollar index declined 0.4% to 97.999 (up 1.9% y-t-d). Japan's Nikkei Equities Index declined 0.4% (up 16.4% y-t-d). During downturns, junk-bond prices tend to start falling three months ahead of equities… Nationally, home prices rose 3.4% annually in May, down from the 3.5% annual gain in April, according to the S&amp;P CoreLogic Case-Shiller home price indices. S&amp;P attributed the cut to the local government’s high debt burden and said the LGFV’s credit profile will remain under pressure for the next two years.<br /><br />Curiously, EM currencies this week under the most selling pressure were in many cases economies on the hook to Creditors for large amounts of foreign-denominated debt. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. November 10 - Reuters (Rodrigo Campos): “Social unrest worldwide is alarming some global investors, who say protests from Hong Kong and Lebanon to Chile are forcing them to be more cautious even though the impact on financial markets has been spotty so far… August 16 - Reuters (Trevor Hunnicutt): “One Federal Reserve policymaker who opposed the Fed’s recent rate cut is considering whether to support such a move now given risks that a U.S.-China trade war and global slowdown could derail the economy. ‘With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,’ the IIF said…<br /><br />China - along with the world more generally - has never been as vulnerable to a sudden Credit slowdown. November 15 - Reuters (Marc Jones): “Global debt is on course to end 2019 at a record high of more than $255 trillion, the Institute of International Finance estimated on Friday - nearly $32,500 for each of the 7.7 billion people on planet. Over the past year, Fed Credit contracted $98.6bn, or 2.4%. Fed Credit inflated $1.196 Trillion, or 43%, over the past 366 weeks. 2.7 trillion and $2.6 trillion, respectively. Government debt alone is set to top $70 trillion this year, as will overall debt (government, corporate and financial sector) of emerging-market countries. ‘Beijing has used intimidation to try to stop ASEAN nations from exploiting the off-shore resources, blocking access to 2.5 trillion dollars of oil and gas reserves alone,’ O’Brien told the ASEAN-U.S. After a summer of market turmoil, China now appears to be at a critical juncture as capital outflows reach hundreds of billions of dollars and Beijing draws down heavily on its, albeit large, currency reserves… Banks were the dominant source of lending, and they were subject to specific restraints on Credit expansion (i.e. bank reserve and capital requirements, the gold standard).

Latest revision as of 02:23, 18 October 2020


Government bond markets across the single-currency bloc have been hurt in recent weeks by optimism over a U.S.-China trade deal and signs of stabilisation in economic data. great wall 99 - Reuters (Dhara Ranasinghe and Yoruk Bahceli): “A selloff in southern European bond markets gathered pace on Monday, pushing yields higher, with an inconclusive election in Spain adding to uncertainty in its bond market. European Commission President Jean-Claude Juncker reiterated the EU’s refusal to renegotiate as many of the Conservative Party candidates vying to replace Prime Minister Theresa May said they would seek a new agreement. May 24 - Bloomberg (Jana Randow, Alessandro Speciale, and Piotr Skolimowski): “Mario Draghi is leading a push to stamp out any speculation that the European Central Bank might raise interest rates before it ends quantitative easing. China spell out how it plans to reach as much as $50 billion in agricultural imports annually has become a sticking point in negotiations on a phase one trade deal, according to people familiar with the matter. November 12 - Bloomberg (Sarah Ponczek): “Some of the hottest trades of a tumultuous 2019 are falling out of favor as investors dip their toes into riskier waters. From low-volatility stocks to bonds and gold, the safety trade that reigned among exchange-traded fund investors is unraveling on signs of a rebounding economy and progress in U.S.-China talks.

U.S.-based exchange-traded funds have racked up a record $4 trillion in assets under management as of this year, with 136 ETF providers offering 2,062 ETFs to investors… Yet is does have the potential to be the beginning of something important. In aggregate, ETFs tracking stocks that swing less than the broader market have taken in over $22 billion for a record year… And to have a central bank assume the role of savior for an ill-conceived monetary union guarantees precarious runaway monetary inflation. After refitting its tool kit in September, the central bank opted Tuesday to leave policy unchanged, despite sharply cutting its inflation forecasts. April 28 - Bloomberg: “China’s central bank is considering expanding a new lending tool in an effort to bolster demand for local-government bonds, as policy makers seek to develop a municipal debt market and avoid a credit crunch. Again, I don’t want to read too much into October’s abrupt lending slowdown. Most importantly, a surge in state-directed lending saw Total Social Financing jump an incredible $525bn in January, spurring what would be a record $1.5 TN of first-half Credit growth - and full-year 2016 Credit expansion approaching an unmatched $3.0 TN. Total Commercial Paper added $11.0bn to $1.131 TN.

By early-2007, pricing for a rising mountain of subprime mortgage paper had nowhere to go but down. Freddie Mac 30-year fixed mortgage rates rose six bps to a near four-year high 4.38% (up 23bps y-o-y). Japanese 10-year "JGB" yields slipped two bps to negative 0.07% (down 7bps y-t-d). For the week on the upside, the New Zealand dollar increased 1.2%, the South African rand 1.0%, the British pound 1.0%, the Swiss franc 0.8%, the Swedish krona 0.6%, the Norwegian krone 0.4%, the Japanese yen 0.4%, and the euro 0.3%. On the downside, the South Korean won declined 0.8%, the Australian dollar 0.7%, the Brazilian real 0.5%, the Mexican peso 0.4%, and the Singapore dollar 0.1%. The Chinese renminbi declined 0.17% versus the dollar this week (down 1.85% y-t-d). The U.S. dollar index declined 0.4% to 97.999 (up 1.9% y-t-d). Japan's Nikkei Equities Index declined 0.4% (up 16.4% y-t-d). During downturns, junk-bond prices tend to start falling three months ahead of equities… Nationally, home prices rose 3.4% annually in May, down from the 3.5% annual gain in April, according to the S&P CoreLogic Case-Shiller home price indices. S&P attributed the cut to the local government’s high debt burden and said the LGFV’s credit profile will remain under pressure for the next two years.

Curiously, EM currencies this week under the most selling pressure were in many cases economies on the hook to Creditors for large amounts of foreign-denominated debt. China’s markets are seeing renewed pressure this month as the Federal Reserve projects a faster pace of rate increases for 2017 and its Chinese counterpart tightens monetary conditions to spur deleveraging and defend the exchange rate. November 10 - Reuters (Rodrigo Campos): “Social unrest worldwide is alarming some global investors, who say protests from Hong Kong and Lebanon to Chile are forcing them to be more cautious even though the impact on financial markets has been spotty so far… August 16 - Reuters (Trevor Hunnicutt): “One Federal Reserve policymaker who opposed the Fed’s recent rate cut is considering whether to support such a move now given risks that a U.S.-China trade war and global slowdown could derail the economy. ‘With few signs of slowdown in the pace of debt accumulation, we estimate that global debt will surpass $255 trillion this year,’ the IIF said…

China - along with the world more generally - has never been as vulnerable to a sudden Credit slowdown. November 15 - Reuters (Marc Jones): “Global debt is on course to end 2019 at a record high of more than $255 trillion, the Institute of International Finance estimated on Friday - nearly $32,500 for each of the 7.7 billion people on planet. Over the past year, Fed Credit contracted $98.6bn, or 2.4%. Fed Credit inflated $1.196 Trillion, or 43%, over the past 366 weeks. 2.7 trillion and $2.6 trillion, respectively. Government debt alone is set to top $70 trillion this year, as will overall debt (government, corporate and financial sector) of emerging-market countries. ‘Beijing has used intimidation to try to stop ASEAN nations from exploiting the off-shore resources, blocking access to 2.5 trillion dollars of oil and gas reserves alone,’ O’Brien told the ASEAN-U.S. After a summer of market turmoil, China now appears to be at a critical juncture as capital outflows reach hundreds of billions of dollars and Beijing draws down heavily on its, albeit large, currency reserves… Banks were the dominant source of lending, and they were subject to specific restraints on Credit expansion (i.e. bank reserve and capital requirements, the gold standard).