The Chinese Real Estate Developer Debacles continues to spread from Evergrande to other developers as China’s Central Bank cuts rates due to Omicron spread.
First, China’s Central Bank cut their 1 year medium-term lending rate to 2.85% from 2.95%. And the growing malaise in China’s real estate development continues.
Fresh turmoil rocked Chinese property bonds on Monday on concern over the true scale of the industry’s hidden debts, deepening a selloff among higher-rated firms.
A Logan Group Co. note due 2023 sank 14.1 cents to a record low 62.9 cents after Debtwire reported the developer could be on the hook for $812 million of guarantees on outstanding obligations due through 2023. Country Garden Holdings Co.’s bond due 2024 tumbled 12.9 cents to 67.7 cents, extending last week’s selloff for the country’s biggest developer.
Let’s see if the US Federal Reserve follows through with it rates increases when China is cutting their rates.
Turkey (the nation, not the bird) is now the Venezuela of Europe/Middle East, where insane government policies are destroying both nations.
(Dow Jones) — Turkey’s central bank intervened to arrest the plunge in the country’s currency, which lost as much as 8% of its value against the dollar on Friday in an ongoing crisis that is straining the country’s financial system.
The crash followed another decision by the central bank on Thursday to cut interest rates under pressure from President Recep Tayyip Erdogan, who favors lower rates as a part of a vision to grow the Turkish economy. Mainstream economists have urged the government to raise interest rates to control Turkey’s rising inflation, which reached more than 21% last month, according to official statistics.
The ongoing plunge is putting increasing pressure on ordinary Turks who have seen their savings evaporate, and adding to pressure on the banking system which has high levels of foreign-currency-denominated loans to repay within the next 12 months.
Wow. Turkey’s 10-year sovereign yield rose 42 BPS today to 21.590%. Turkey is looking like the Venezuela of Europe and the Middle East.
The Turkish sovereign curve in their home currency is humped.
But the Turkish yield curve (in US Dollars) looks more like the US Treasury actives curve.
The Turkish Lira is crashing against the US Dollar.
Meanwhile, the Central Bank of Turkey is cutting their repo rate as inflation soars. WTF???
Russia and Brazil are tightening along with Mexico, Colombia, Peru, Argentina and Chile. Add Pakistan, The Czech Republic and Poland to the list of tighteners.
The looseners? The US, of course, with Canada, Australia, China, India, Western Europe, Turkey and Nigeria. New Zealand is the quickest loosener.
This looks very cold war-like. But a monetary cold war.
Let’s see if The Fed becomes a tightener rather than a loosener.
And with a wave of her magic wand, Treasury Secretary Janet Yellen (aka, the Incredible Janet Yellenstone) will make inflation magically return to less than 2% after mid-2020.
Treasury Secretary Janet Yellen said she expects price increases to remain high through the first half of 2022, but rejected criticism that the U.S. risks losing control of inflation.
Inflation is expected to ease in the second half as issues ranging from supply bottlenecks, a tight U.S. labor market and other factors arising from the pandemic improve, Yellen said on CNN’s “State of the Union” on Sunday. The current situation reflects “temporary” pain, shesaid.
“I don’t think we’re about to lose control of inflation,” Yellen said, pushing back on criticism by former Treasury Secretary Lawrence Summers this month. “Americans haven’t seen inflation like we have experienced recently in a long time. But as we get back to normal, expect that to end.”
On Friday, Federal Reserve Chair Jerome Powell sounded a note of heightened concern over persistently high inflation as he made clear that the central bank will begin tapering its bond purchases shortly but remain patient on raising interest rates.
The S&P 500 Index posted its first decline in eight days, while benchmark Treasuries rallied to send 10-year yields down by the most in more than two months. Inflation expectations remain elevated — the 10-year breakeven rate of 2.64% is within 15 basis points of the record high reached in 2005 — and rates traders maintained bets the Fed will hike at least once within a year.
Powell said policies are “well-positioned” to manage a range of outcomes.
So Janet, are you saying that home price growth is going to slow to 2% YoY after mid-2022? Or that the Biden Administration is going to build the Canadian pipeline to help ease energy costs? Or that west coast ports get magically unclogged? Or that chips for cars will magically begin appearing?
I forget. The Fed doesn’t consider housing or energy prices in their inflation measurements. So, Yellen and The Fed ignore that most important expenditures for households.
The Fed’s breakeven inflation rates are considerably lower than current core inflation (green line).
No wonder Yellen and Powell can make inflation magically disappear. Don’t count it!
Confounded Interest - Anthony B. Sanders 
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