DeepState
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The bond market.
General Macro Observations
- Thread starter DeepState
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The bond market.
CanOz
Home runs feel good, but base hits pay bills!
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lol...thats a pretty good, if not at times twisted opinion!
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plenty of info int he below - have just put a few of the big picture stuff down below. Lots of good graphs.
http://www.zerohedge.com/news/2014-...hopes-more-pboc-easing-conventional-wisdom-ag
The breakdown of actual TSF components is as follows, per BofA:
As for the new loan components:
The PBOC provided its own explanation:
The PBoC believes credit and aggregate financing growth is still in a reasonable range after adjusting for seasonal factors, irregular issues and base effects. The PBoC said in its statement that China’s daily new RMB loans were RMB30-50bn in early August, suggesting robust (normalized) credit growth in August. The jump in deposits in June and subsequent decline in July resulted from seasonal factors, which in turn led to the rise and fall of loans (note the CBRC does a serious mid-year assessment with a focus on loan to deposit ratio, forcing banks to ramp up deposits at the end of June). The fluctuation was widened by the rapid growth in bank wealth management (WMPs) and internet-based money market funds. IPOs in July also diluted some deposits, which in turn constrained growth in bank loans and other types of credit such as entrusted loans and bonds. In addition, growth of non-standard financing was curbed by new regulations introduced and financial institutions strengthening their risk control. The PBoC did see some impact from the demand side. With the economy facing downward pressure and corrections in the property market, effective loan demand is not as strong as before. Banks are more cautious in granting loans to some high risk regions and sectors.
http://www.zerohedge.com/news/2014-...hopes-more-pboc-easing-conventional-wisdom-ag
The breakdown of actual TSF components is as follows, per BofA:
- New loans fell sharply to RMB385bn in July from RMB1,079bn in June, driven by a decline in new corporate short-term loans. The hefty RMB345bn in new corporate short-term loans in June was perhaps due to a response by banks to the government’s call for supporting growth as well as the need to meet mid-year regulatory requirements on deposits.
- Both entrusted and trust loans declined in July, perhaps due to tighter regulation on interbank business. New entrusted loans decreased to RMB122bn from RMB272bn, while new trust loans contracted by RMB16bn from a net increase of RMB120bn in June.
- New corporate bonds declined to RMB143bn in July from RMB261bn in June, in part reflecting a temporary shortage of liquidity on resumed IPOs. However, we notice the issuance of LGFV bonds decreased to RMB77bn from a monthly average of RMB237bn in 2Q. The trend of slower issuance of LGFV bonds echoed our long-held view that the central government should leverage up (via PSL for instance) rather than build up local government indebtedness. We expect local governments will get a large amount of funding from the China Development Bank which in turn will get funding from the PBoC’s PSL scheme in the second half of this year.
- Non-discounted bankers acceptance (BA) decreased by RMB416bn in July, after increasing by RMB144bn in June. However, BA is notoriously volatile and the data are of low quality.
- FX loans contracted by RMB17bn in July after rising by RMB36bn in June, although sentiment of stronger CNY/USD returned last month.
As for the new loan components:
- New medium-to-long-term (MLT) corporate loans moderated to RMB208bn in July, compared to RMB269bn in June, suggesting some moderation in loan demand for fixed asset investment projects.
- New short-term corporate loans declined by RMB236bn in July, sharply down from the RMB354bn increase in June, mainly driven by seasonal factors as new short-term corporate loans surged in June. Meanwhile, new discounted bills jumped to RMB173bn in July from to RMB78bn.
- New MLT loans to households (mainly mortgage loans) moderated to RMB180bn in July from RMB199bn in June. This number is still relatively robust compared to the monthly average of RMB188bn in 2013. There have been some local news reports of banks reintroducing discounts to the benchmark lending rate in bigger cities and shortening of mortgage release time. Meanwhile, new short-term loans to households dropped to RMB26bn in July from RMB158bn in June.
The PBOC provided its own explanation:
The PBoC believes credit and aggregate financing growth is still in a reasonable range after adjusting for seasonal factors, irregular issues and base effects. The PBoC said in its statement that China’s daily new RMB loans were RMB30-50bn in early August, suggesting robust (normalized) credit growth in August. The jump in deposits in June and subsequent decline in July resulted from seasonal factors, which in turn led to the rise and fall of loans (note the CBRC does a serious mid-year assessment with a focus on loan to deposit ratio, forcing banks to ramp up deposits at the end of June). The fluctuation was widened by the rapid growth in bank wealth management (WMPs) and internet-based money market funds. IPOs in July also diluted some deposits, which in turn constrained growth in bank loans and other types of credit such as entrusted loans and bonds. In addition, growth of non-standard financing was curbed by new regulations introduced and financial institutions strengthening their risk control. The PBoC did see some impact from the demand side. With the economy facing downward pressure and corrections in the property market, effective loan demand is not as strong as before. Banks are more cautious in granting loans to some high risk regions and sectors.
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An interesting read and quite relevant witht eh current escalating tensions between China and the rest of Asia.
http://twq.elliott.gwu.edu/japan-muddle-model
http://twq.elliott.gwu.edu/japan-muddle-model
DeepState
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Thanks. Have reviewed a few other things which corroborate.
Seasonal factors and some technicalities have affected this result. Notable for decline in shadow activity implied by entrusted (in particular) and trust loans. The market is probably right to look through it overall. If another weak result comes along, a lot of the arguments relating to seasonality will have to be scrubbed and this decline takes a different hue. But movements for Aug thus far don't point to it. Activity indicators and surveys do not support any thesis of credit induced reduction in activity over this period. PBoC statements are broadly in alignment.
Interesting about the PSLs. Hadn't heard about that previously. It is changing the source of financing for LGFV. This moves the source of implicit support for LGSVs to a more explicit footing and controls their borrowing more directly. Quite a nice move in terms of centralising command and preventing excess spending. Whether the source of funding for the PSLs results in sterilised or non-sterilised finance will be interesting. QE for China? Conceivable given the contribution from trade becomes more important as fixed asset investment fades, and likely in the event of a banking crisis.
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a quick browse it seems interesting. hopefully nothing breaks at work this afternoon and I can have a read
http://www.voxeu.org/content/secular-stagnation-facts-causes-and-cures
http://www.voxeu.org/content/secular-stagnation-facts-causes-and-cures
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so this is how CDS work when a country is in legal default. Just don't lose those bonds
http://www.bloombergview.com/articles/2014-08-14/argentina-defaulted-on-bonds-no-one-can-even-find
http://www.bloombergview.com/articles/2014-08-14/argentina-defaulted-on-bonds-no-one-can-even-find
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what happens when someone decides half that paper was taken from the bathroom?
http://soberlook.com/2014/08/eurozone-banks-hold-record-amounts-if.html
This has two major consequences:
1. Government bonds crowd out private sector credit, limiting loan growth in a number of countries.
2. Banks are becoming more intertwined with their central governments - something that was part of the cause of the debt crisis. Governments depend on banks for cheap funding and banks depend on their governments for support (bailout) in case of a liquidity crunch.
http://soberlook.com/2014/08/eurozone-banks-hold-record-amounts-if.html
This has two major consequences:
1. Government bonds crowd out private sector credit, limiting loan growth in a number of countries.
2. Banks are becoming more intertwined with their central governments - something that was part of the cause of the debt crisis. Governments depend on banks for cheap funding and banks depend on their governments for support (bailout) in case of a liquidity crunch.
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numerology and the IMF. Seriously???
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For those interested in credit risks. some good graphs and tips
http://www.pimco.com.au/EN/Insights...-Trade-Implications-For-Credit-Investors.aspx
http://www.pimco.com.au/EN/Insights...-Trade-Implications-For-Credit-Investors.aspx
- Australia is contending with a multi-year decline in the terms of trade and a rebalancing toward the non-mining sectors of the economy.
- For companies, the macroeconomic consequences of a downswing in the terms of trade provide both challenges and benefits.
- For investors, it is important to find companies that have a clear, demonstrated understanding of the macro environment and can navigate the headwinds through operational efficiencies, cost control, market positioning and balance sheet management.
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DeepState
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The shape is proceeding as would be predicted by disease transmission models. As a % of population infected, the sigmoid shape is the standard model.....but what is the population? It depends on how effective containment of the disease is:
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I'm assuming after the clinic patients were liberated along with a large amount of contaminated items, containment is not working out so well. Pretty sure that event alone is going to ensure another large spike in new cases in a week or 2
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not looking good for LNG in Australia. On the bright side it might help to contain the pending price increase for east coast natural gas.
http://www.lngworldnews.com/platts-asia-spot-lng-prices-for-september-delivery-plummet-33-1-pct/
Prices of spot liquefied natural gas for September delivery to Asia plummeted 33.1% year over year to an average $10.702 per million British thermal units (/MMBtu), the latest Platts Japan/Korea Marker (Platts JKM) for month-ahead delivery showed.
The drop came as increased supply in the region continued to outweigh lackluster demand.
On a month-over-month basis, the September JKM was down 5.8% from August. The data reflects the daily Platts JKM for September assessed between July 16 and August 15, and expressed as a monthly average.
“The results of Australia’s North West Shelf LNG tender for cargoes loading in September, October and November showed a steep contango building into the traditionally high-demand winter season,” said Stephanie Wilson, managing editor of Asia LNG at Platts. “This prompted some buyers in Japan to purchase cargoes for October at prices significantly above those seen in September.”
At $10.702/MMBtu, the average Platts JKM for September was the lowest monthly average on record since April 2011, and reflected the largest year-over-year decrease in 2014.
Despite the year-over-year plunge for average September-delivery prices, the month-over-month decline was the narrowest since March, when prices began their rapid descent.
After beginning the assessment period at $10.775/MMBtu July 16, spot prices bottomed at $10.525/MMBtu August 1 as a slew of supply tenders in the Asia-Pacific basin hit the market. It was the lowest daily spot price seen since Friday, March 11, 2011, when the JKM was $9.90/MMBtu. The spot JKM had spiked to $10.95/MMBtu on March 15, 2011, in the wake of the Great Eastern Earthquake and resulting Fukushima crisis in Japan.
The Platts JKM began its rebound on August 8, gaining a total of 40 cents before ending the assessment period at $11.025/MMBtu August 15. This brought a close to five consecutive months of declines and reversed the downtrend in spot prices.
“The removal of deferment clauses on cargoes loading from train 1 of the new ExxonMobil-led Papua New Guinea integrated LNG project also fuelled the more bullish sentiment, as traders and sellers can now compete for these cargoes too,”Wilson explained. “On the other hand, end-user inventories remained high despite higher temperatures in Japan and South Korea in recent weeks, giving buyers flexibility in their delivery schedules. Numerous projects in Asia also continued to offer additional supply to the spot market, which could suggest a cap to potential price increases.”
http://www.lngworldnews.com/platts-asia-spot-lng-prices-for-september-delivery-plummet-33-1-pct/
Prices of spot liquefied natural gas for September delivery to Asia plummeted 33.1% year over year to an average $10.702 per million British thermal units (/MMBtu), the latest Platts Japan/Korea Marker (Platts JKM) for month-ahead delivery showed.
The drop came as increased supply in the region continued to outweigh lackluster demand.
On a month-over-month basis, the September JKM was down 5.8% from August. The data reflects the daily Platts JKM for September assessed between July 16 and August 15, and expressed as a monthly average.
“The results of Australia’s North West Shelf LNG tender for cargoes loading in September, October and November showed a steep contango building into the traditionally high-demand winter season,” said Stephanie Wilson, managing editor of Asia LNG at Platts. “This prompted some buyers in Japan to purchase cargoes for October at prices significantly above those seen in September.”
At $10.702/MMBtu, the average Platts JKM for September was the lowest monthly average on record since April 2011, and reflected the largest year-over-year decrease in 2014.
Despite the year-over-year plunge for average September-delivery prices, the month-over-month decline was the narrowest since March, when prices began their rapid descent.
After beginning the assessment period at $10.775/MMBtu July 16, spot prices bottomed at $10.525/MMBtu August 1 as a slew of supply tenders in the Asia-Pacific basin hit the market. It was the lowest daily spot price seen since Friday, March 11, 2011, when the JKM was $9.90/MMBtu. The spot JKM had spiked to $10.95/MMBtu on March 15, 2011, in the wake of the Great Eastern Earthquake and resulting Fukushima crisis in Japan.
The Platts JKM began its rebound on August 8, gaining a total of 40 cents before ending the assessment period at $11.025/MMBtu August 15. This brought a close to five consecutive months of declines and reversed the downtrend in spot prices.
“The removal of deferment clauses on cargoes loading from train 1 of the new ExxonMobil-led Papua New Guinea integrated LNG project also fuelled the more bullish sentiment, as traders and sellers can now compete for these cargoes too,”Wilson explained. “On the other hand, end-user inventories remained high despite higher temperatures in Japan and South Korea in recent weeks, giving buyers flexibility in their delivery schedules. Numerous projects in Asia also continued to offer additional supply to the spot market, which could suggest a cap to potential price increases.”
DeepState
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WES-AU commentary includes a supportive retail environment and an improving one since report date. Westpac Redbook shows consumer confidence recovering and lagging business confidence. Stevens (RBA) reports expectations that consumer spending will exceed income growth, albeit not by the margin prior to GFC. A floor under domestic consumer spend, it seems.
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http://blogs.reuters.com/james-saft...ds-cash-individuals-holdings-hit-14-year-low/
Individual investors have been cutting back on cash in portfolios, the exact reverse of what Warren Buffett has been doing at Berkshire Hathaway.
Who do you think has got it right?
Cash at Berkshire Hathaway stood at just over $55 billion as of June 30, an all-time high and two and a half times
the level he’s in the past said he likes to keep on tap to meet extraordinary claims at his insurance businesses. That’s also up more than 50 percent from a year ago.
Buffett’s green pile is in sharp contrast to individual investors, who’ve cut cash in portfolios to 15.8 percent, a
14-year low, according to the July asset allocation survey from the American Association of Individual Investors.
Individual investors have been cutting back on cash in portfolios, the exact reverse of what Warren Buffett has been doing at Berkshire Hathaway.
Who do you think has got it right?
Cash at Berkshire Hathaway stood at just over $55 billion as of June 30, an all-time high and two and a half times
the level he’s in the past said he likes to keep on tap to meet extraordinary claims at his insurance businesses. That’s also up more than 50 percent from a year ago.
Buffett’s green pile is in sharp contrast to individual investors, who’ve cut cash in portfolios to 15.8 percent, a
14-year low, according to the July asset allocation survey from the American Association of Individual Investors.
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http://money.cnn.com/2014/08/21/news/economy/aging-countries-moodys/index.html
The world is graying at a break-neck pace and that's bad news for the global economy. By 2020, 13 countries will be "super-aged" -- with more than 20% of the population over 65 -- according to a report by Moody's Investor Service.
That number will rise to 34 nations by 2030. Only three qualify now: Germany, Italy and Japan.
"Demographic transition ... is now upon us," warn Elena Duggar and Madhavi Bokil, the authors of the Moody's report. "The unprecedented pace of aging will have a significant negative effect on economic growth over the next two decades across all regions."
According to Moody's, Greece and Finland will turn "super-aged" next year. Eight countries, including France and Sweden, will have joined them by 2020. Canada, Spain and the U.K. will be "super-aged" by 2025, and the U.S. will follow by 2030.
The problem isn't confined to Europe and North America. Singapore and Korea will be in that category by 2030, while China will also face "severe aging pressures."
The world is graying at a break-neck pace and that's bad news for the global economy. By 2020, 13 countries will be "super-aged" -- with more than 20% of the population over 65 -- according to a report by Moody's Investor Service.
That number will rise to 34 nations by 2030. Only three qualify now: Germany, Italy and Japan.
"Demographic transition ... is now upon us," warn Elena Duggar and Madhavi Bokil, the authors of the Moody's report. "The unprecedented pace of aging will have a significant negative effect on economic growth over the next two decades across all regions."
According to Moody's, Greece and Finland will turn "super-aged" next year. Eight countries, including France and Sweden, will have joined them by 2020. Canada, Spain and the U.K. will be "super-aged" by 2025, and the U.S. will follow by 2030.
The problem isn't confined to Europe and North America. Singapore and Korea will be in that category by 2030, while China will also face "severe aging pressures."
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