MARKETWATCH
"China's manufacturing activity surges in July"
By MarketWatch
Published: Aug. 2, 2020 at 11:47 p.m. ET
BEIJING--A private gauge of China's manufacturing activity rose in July to its highest level in more than nine years, boosted by accelerated production and recovering demand.
The Caixin China manufacturing purchasing managers index, which is weighted toward small private manufacturers, rose to 52.8 in July from 51.2 in June, Caixin Media Co. and research firm Markit said Monday.
July's reading marked the third consecutive month that the Caixin PMI stood above the 50 level separating contraction from expansion.
Manufacturers' production expanded for the fifth month in a row and rose at the fastest pace in 9.5 years, Caixin said.
Total new orders, reflecting demand from home and abroad, also increased at the fastest rate since the start of 2011.
However, total new export orders remained in contraction territory for the seventh straight month, though the pace of contraction slowed.
"Manufacturing demand and supply continued to recover, but overseas demand remained subdued," Wang Zhe, a senior economist at Caixin Insight Group, said in a statement accompanying the data.
China's official manufacturing PMI, which is focused more on large state-owned companies, also edged up to a four-month high of 51.1 in July from 50.9 in June, data released by the National Bureau of Statistics showed last week.
The official survey of manufacturers has a much larger sample than the private survey.
https://www.marketwatch.com/story/china ... cle_inline
CHINA
Re: CHINA
CNBC
"A surprise spate of bond defaults by state-owned Chinese firms is spooking investors"
Weizhen Tan @weizent
Published Thu, Nov 19 2020
Key Points
* A series of high-profile defaults involving state-owned enterprises in China led to a bond market selloff last week.
* Defaults by government-supported firms in China were rare before recent times.
* Those defaults are coming even as many asset managers, bullish on Chinese debt, have this year been pushing their calls on these investments, which offer a very attractive proposition for investors with their yields.
SINGAPORE — A series of high-profile defaults involving state-owned companies in China — normally a safe pick for investors — have jolted the credit market and rattled investors, leading to last week’s bond market selloff.
As the bleeding continues pointing to signs of more bond defaults ahead, observers are debating the questions of why more state-owned enterprises (SOEs) are being left in the cold this time compared to the past two decades and what segments of the market, if any, will the government choose to support.
State-owned miner Yongcheng Coal and Electricity defaulted on a 1 billion yuan ($151.9million) bond last week, triggering a broadened state investigation into three underwriting banks suspected of misconduct.
Other high-profile debt defaults followed suit this week, including government-backed chipmaker Tsinghua Unigroup, which missed payment after failing to extend its deadline for repayment, and another default by state-owned Huachen Automotive Group — a Chinese joint venture partner of BMW.
Last month, one of China’s largest property developers China Evergrande also came under the spotlight for reportedly having cash crunch issues.
“The [Yongcheng] default triggered investor concerns about the entire corporate bond market, because it breaks the long-held assumption about an implicit government guarantee for SOE bonds,” ANZ Research’s China Markets Economist Zhaopeng Xing wrote in a note on Friday.
The first-time default rate for SOEs are well below 1% currently, as compared to the 9% default rate by private enterprises, according to ANZ’s data.
Defaults by government-supported firms in China were rare before recent times.
Late last December, the case of a dollar-bond default by commodity trader Tewoo Group was the first in two decades.
More defaults are coming as Chinese authorities refocus on deleveraging of SOEs now that the worst of the pandemic has passed.
These defaults are coming even as many asset managers, bullish on Chinese debt, have been pushing calls on investments into Chinese bonds this year.
They offer a very attractive proposition for investors with their yields — far higher than U.S. or European yields — in a world where it’s increasingly hard to come by.
China’s onshore bond market is worth $13 trillion, the world’s second largest.
So far this year, investors have lapped them up.
Foreign inflows into onshore Chinese bonds via funds shot up to a year-high of $21.43 billion in March, compared to $9.5 billion at the end of last year, according to Refinitiv data.
The iShares Barclays USD Asia High Yield Bond is up over 31% since a low in March.
Here’s what analysts think are some factors playing into the recent spate of defaults involving Chinese state-owned enterprises.
Recovery from the pandemic
The Chinese government may be more willing to accept defaults as the economy recovers from the pandemic – coupled with its desire to reduce debt in the economy, says S&P Global Ratings in a note on Tuesday.
“More defaults are coming as Chinese authorities refocus on deleveraging of SOEs now that the worst of the pandemic has passed,” said Chang Li, China country specialist at S&P Global Ratings.
Beijing had been on a deleveraging drive with debt skyrocketing in the country, but held off as the pandemic hit businesses.
Instead, authorities encouraged banks to approve more loans to small and medium businesses.
But now, debt is shooting up again as the pandemic put businesses under pressure — leading authorities to refocus on reducing the level of debt again.
“In our view the sell-offs, which were sharper for domestic than overseas bonds, reflect the potential willingness to allow even large SOE to default,” the note added.
The market may see this as a signal that the SOE deleveraging and reform will accelerate as the economy recovers from the pandemic.
S&P flagged the example of state-owned miner Yongcheng Coal and Electricity — which missed its bond payment that was due on Nov. 10.
It could lead to a cross default by its parent company Henan Energy and Chemical Industry, one of the largest state-owned firms in Henan province, it said.
Together, that puts 50 billion yuan ($7.6 billion) at risk of default, according to the ratings firm.
S&P pointed to the “seemingly abrupt removal of government support” in the case of the coal miner.
Just a month before it defaulted, the ratings firm said Yongcheng was believed to be swapping loss-making chemical businesses for profitable coal businesses.
Additionally, it had just issued a 1 billion yuan medium-term note in October.
Those actions together had been taken as “signs of government support,” according to S&P.
“In our view, [Yongcheng]’s missed payment surprised the market because it indicated the local government’s attitude to provide support had reversed within just one month,” said Li.
“The market may see this as a signal that the SOE deleveraging and reform will accelerate as the economy recovers from the pandemic.”
Opportunity to weed out the bad?
The Chinese government has been allowing some of the companies “with very weak credit matrixes to go under without a rescue,” said Tan Min Lan, Asia Pacific head of chief investment office at UBS Global Wealth Management.
But that’s actually a positive, she said, suggesting it allowed for some “differentiation” in the Chinese market between stronger and weaker firms.
“We’ve been saying for some time now that increasing credit differentiation actually is a positive for the long-term development of the Chinese market."
"Now if you just unwind 2 years back, there’s completely no differentiation because there’s no defaults,” she told CNBC’s “Squawk Box Asia” on Wednesday.
Pandemic strains financial resources
The coronavirus pandemic has strained public resources as the government embarked on stimulus to support businesses amid the fallout.
The impact is probably making itself felt now.
“The pandemic and increasingly stringent regulations from central authorities could restrain local governments’ power to coordinate financial resources, and even the willingness to provide support,” S&P Global Ratings said.
Data also provided by Reuters
https://www.cnbc.com/2020/11/20/china-b ... cerns.html
"A surprise spate of bond defaults by state-owned Chinese firms is spooking investors"
Weizhen Tan @weizent
Published Thu, Nov 19 2020
Key Points
* A series of high-profile defaults involving state-owned enterprises in China led to a bond market selloff last week.
* Defaults by government-supported firms in China were rare before recent times.
* Those defaults are coming even as many asset managers, bullish on Chinese debt, have this year been pushing their calls on these investments, which offer a very attractive proposition for investors with their yields.
SINGAPORE — A series of high-profile defaults involving state-owned companies in China — normally a safe pick for investors — have jolted the credit market and rattled investors, leading to last week’s bond market selloff.
As the bleeding continues pointing to signs of more bond defaults ahead, observers are debating the questions of why more state-owned enterprises (SOEs) are being left in the cold this time compared to the past two decades and what segments of the market, if any, will the government choose to support.
State-owned miner Yongcheng Coal and Electricity defaulted on a 1 billion yuan ($151.9million) bond last week, triggering a broadened state investigation into three underwriting banks suspected of misconduct.
Other high-profile debt defaults followed suit this week, including government-backed chipmaker Tsinghua Unigroup, which missed payment after failing to extend its deadline for repayment, and another default by state-owned Huachen Automotive Group — a Chinese joint venture partner of BMW.
Last month, one of China’s largest property developers China Evergrande also came under the spotlight for reportedly having cash crunch issues.
“The [Yongcheng] default triggered investor concerns about the entire corporate bond market, because it breaks the long-held assumption about an implicit government guarantee for SOE bonds,” ANZ Research’s China Markets Economist Zhaopeng Xing wrote in a note on Friday.
The first-time default rate for SOEs are well below 1% currently, as compared to the 9% default rate by private enterprises, according to ANZ’s data.
Defaults by government-supported firms in China were rare before recent times.
Late last December, the case of a dollar-bond default by commodity trader Tewoo Group was the first in two decades.
More defaults are coming as Chinese authorities refocus on deleveraging of SOEs now that the worst of the pandemic has passed.
These defaults are coming even as many asset managers, bullish on Chinese debt, have been pushing calls on investments into Chinese bonds this year.
They offer a very attractive proposition for investors with their yields — far higher than U.S. or European yields — in a world where it’s increasingly hard to come by.
China’s onshore bond market is worth $13 trillion, the world’s second largest.
So far this year, investors have lapped them up.
Foreign inflows into onshore Chinese bonds via funds shot up to a year-high of $21.43 billion in March, compared to $9.5 billion at the end of last year, according to Refinitiv data.
The iShares Barclays USD Asia High Yield Bond is up over 31% since a low in March.
Here’s what analysts think are some factors playing into the recent spate of defaults involving Chinese state-owned enterprises.
Recovery from the pandemic
The Chinese government may be more willing to accept defaults as the economy recovers from the pandemic – coupled with its desire to reduce debt in the economy, says S&P Global Ratings in a note on Tuesday.
“More defaults are coming as Chinese authorities refocus on deleveraging of SOEs now that the worst of the pandemic has passed,” said Chang Li, China country specialist at S&P Global Ratings.
Beijing had been on a deleveraging drive with debt skyrocketing in the country, but held off as the pandemic hit businesses.
Instead, authorities encouraged banks to approve more loans to small and medium businesses.
But now, debt is shooting up again as the pandemic put businesses under pressure — leading authorities to refocus on reducing the level of debt again.
“In our view the sell-offs, which were sharper for domestic than overseas bonds, reflect the potential willingness to allow even large SOE to default,” the note added.
The market may see this as a signal that the SOE deleveraging and reform will accelerate as the economy recovers from the pandemic.
S&P flagged the example of state-owned miner Yongcheng Coal and Electricity — which missed its bond payment that was due on Nov. 10.
It could lead to a cross default by its parent company Henan Energy and Chemical Industry, one of the largest state-owned firms in Henan province, it said.
Together, that puts 50 billion yuan ($7.6 billion) at risk of default, according to the ratings firm.
S&P pointed to the “seemingly abrupt removal of government support” in the case of the coal miner.
Just a month before it defaulted, the ratings firm said Yongcheng was believed to be swapping loss-making chemical businesses for profitable coal businesses.
Additionally, it had just issued a 1 billion yuan medium-term note in October.
Those actions together had been taken as “signs of government support,” according to S&P.
“In our view, [Yongcheng]’s missed payment surprised the market because it indicated the local government’s attitude to provide support had reversed within just one month,” said Li.
“The market may see this as a signal that the SOE deleveraging and reform will accelerate as the economy recovers from the pandemic.”
Opportunity to weed out the bad?
The Chinese government has been allowing some of the companies “with very weak credit matrixes to go under without a rescue,” said Tan Min Lan, Asia Pacific head of chief investment office at UBS Global Wealth Management.
But that’s actually a positive, she said, suggesting it allowed for some “differentiation” in the Chinese market between stronger and weaker firms.
“We’ve been saying for some time now that increasing credit differentiation actually is a positive for the long-term development of the Chinese market."
"Now if you just unwind 2 years back, there’s completely no differentiation because there’s no defaults,” she told CNBC’s “Squawk Box Asia” on Wednesday.
Pandemic strains financial resources
The coronavirus pandemic has strained public resources as the government embarked on stimulus to support businesses amid the fallout.
The impact is probably making itself felt now.
“The pandemic and increasingly stringent regulations from central authorities could restrain local governments’ power to coordinate financial resources, and even the willingness to provide support,” S&P Global Ratings said.
Data also provided by Reuters
https://www.cnbc.com/2020/11/20/china-b ... cerns.html
Re: CHINA
CNBC
"China’s central bank could intervene after ‘glaring’ state-firm bond defaults, analyst says"
Eustance Huang @EustanceHuang
Published Fri, Nov 27 2020
Key Points
* The People’s Bank of China (PBOC) could step in following a number of recent bond defaults by Chinese state-linked firms, according to Bank of Communications International’s Hao Hong.
* It’s in the PBOC’s “best interest” to maintain sufficient liquidity to avoid “systemic risk,” Hong told CNBC on Friday.
SINGAPORE — The People’s Bank of China (PBOC) could step in following a number of recent bond defaults by Chinese state-linked firms, according to Bank of Communications International’s Hao Hong.
“In the past couple of weeks the default situation is somehow getting glaring,” Hong, managing director and head of research at the firm, told CNBC’s “Street Signs Asia” on Friday.
“I wouldn’t be surprised to see the PBOC intervene from here,” he said.
Earlier in November, state-owned coal miner Yongcheng Coal and Electricity defaulted on a 1 billion yuan (around $152.01 million) bond, catching investors off guard given the firm’s AAA-rating by a domestic agency.
Other high-profile debt defaults followed, including government-backed chipmaker Tsinghua Unigroup.
Hong said it’s in the Chinese central bank’s “best interest” to maintain sufficient liquidity to avoid “systemic risk.”
The PBOC previously warned in its financial stability report that factors such as a reliance on borrowing to make debt repayments by some large firms could present a risk to the entire economy, according to CNBC’s translation of the Mandarin-language text.
“I think recently the corporate default is catching a lot of people’s attention,” the analyst said.
“I would say that, you know, it is concerning because it’s coming from (state-owned enterprises) but then at the same time, it’s a relatively small amount in a very large market.”
Asked when concerns over the bond market could subside, Hong highlighted a “very large bid from unknown buyers” going into the market yesterday to “shore up” the questionable bonds — an activity usually associated with government-related entities.
He also compared the situation to China’s “unprecedented liquidity crisis” in 2013, when money market rates soared and short-term rates touched record highs.
“During that time, overnight interest rate was hitting almost 50%,” Hong said.
“We haven’t seen that kind of level for interest rate for years and years since then.”
— CNBC’s Weizhen Tan and Yen Nee Lee contributed to this report.
Data also provided by Reuters
https://www.cnbc.com/2020/11/27/chinas- ... alyst.html
"China’s central bank could intervene after ‘glaring’ state-firm bond defaults, analyst says"
Eustance Huang @EustanceHuang
Published Fri, Nov 27 2020
Key Points
* The People’s Bank of China (PBOC) could step in following a number of recent bond defaults by Chinese state-linked firms, according to Bank of Communications International’s Hao Hong.
* It’s in the PBOC’s “best interest” to maintain sufficient liquidity to avoid “systemic risk,” Hong told CNBC on Friday.
SINGAPORE — The People’s Bank of China (PBOC) could step in following a number of recent bond defaults by Chinese state-linked firms, according to Bank of Communications International’s Hao Hong.
“In the past couple of weeks the default situation is somehow getting glaring,” Hong, managing director and head of research at the firm, told CNBC’s “Street Signs Asia” on Friday.
“I wouldn’t be surprised to see the PBOC intervene from here,” he said.
Earlier in November, state-owned coal miner Yongcheng Coal and Electricity defaulted on a 1 billion yuan (around $152.01 million) bond, catching investors off guard given the firm’s AAA-rating by a domestic agency.
Other high-profile debt defaults followed, including government-backed chipmaker Tsinghua Unigroup.
Hong said it’s in the Chinese central bank’s “best interest” to maintain sufficient liquidity to avoid “systemic risk.”
The PBOC previously warned in its financial stability report that factors such as a reliance on borrowing to make debt repayments by some large firms could present a risk to the entire economy, according to CNBC’s translation of the Mandarin-language text.
“I think recently the corporate default is catching a lot of people’s attention,” the analyst said.
“I would say that, you know, it is concerning because it’s coming from (state-owned enterprises) but then at the same time, it’s a relatively small amount in a very large market.”
Asked when concerns over the bond market could subside, Hong highlighted a “very large bid from unknown buyers” going into the market yesterday to “shore up” the questionable bonds — an activity usually associated with government-related entities.
He also compared the situation to China’s “unprecedented liquidity crisis” in 2013, when money market rates soared and short-term rates touched record highs.
“During that time, overnight interest rate was hitting almost 50%,” Hong said.
“We haven’t seen that kind of level for interest rate for years and years since then.”
— CNBC’s Weizhen Tan and Yen Nee Lee contributed to this report.
Data also provided by Reuters
https://www.cnbc.com/2020/11/27/chinas- ... alyst.html
Re: CHINA
CNBC
"China’s central bank injects 950 billion yuan of medium-term loans, leaves rate unchanged"
Reuters
Published Tues, Dec 15 2020
Key Points
* China’s central bank on Tuesday rolled over maturing medium-term loans while keeping the interest rate unchanged for an eighth straight month.
* The People’s Bank of China (PBOC) said in a statement it was keeping the rate on 950 billion yuan ($145 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions steady at 2.95% from previous operations.
* The fresh fund injection far exceeded two batches of such MLF loans that are set to expire in December, with a total volume of 600 billion yuan.
China’s central bank on Tuesday rolled over maturing medium-term loans while keeping the interest rate unchanged for an eighth straight month.
The People’s Bank of China (PBOC) said in a statement it was keeping the rate on 950 billion yuan ($145 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions steady at 2.95% from previous operations.
The fresh fund injection far exceeded two batches of such MLF loans that are set to expire in December, with a total volume of 600 billion yuan.
Markets also expect no change for the country’s benchmark loan prime rate (LPR) at its monthly fixing next Monday.
The central bank has made two cuts to the borrowing cost of MLF loans this year, with a total size of 30 basis points.
The PBOC said in the statement that the rollover was meant to keep “banking system liquidity reasonably ample”, and the fund injection “fully met financial institutions’ demand.”
In the same online statement, the PBOC also said it has injected another 10 billion yuan via seven-day reverse repos, with the rate unchanged.
The MLF, one of the PBOC’s main tools in managing longer-term liquidity in the banking system, serves as a guide for the LPR, which is set monthly using assessments from 18 banks.
Data also provided by Reuters
https://www.cnbc.com/2020/12/15/chinas- ... loans.html
"China’s central bank injects 950 billion yuan of medium-term loans, leaves rate unchanged"
Reuters
Published Tues, Dec 15 2020
Key Points
* China’s central bank on Tuesday rolled over maturing medium-term loans while keeping the interest rate unchanged for an eighth straight month.
* The People’s Bank of China (PBOC) said in a statement it was keeping the rate on 950 billion yuan ($145 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions steady at 2.95% from previous operations.
* The fresh fund injection far exceeded two batches of such MLF loans that are set to expire in December, with a total volume of 600 billion yuan.
China’s central bank on Tuesday rolled over maturing medium-term loans while keeping the interest rate unchanged for an eighth straight month.
The People’s Bank of China (PBOC) said in a statement it was keeping the rate on 950 billion yuan ($145 billion) worth of one-year medium-term lending facility (MLF) loans to financial institutions steady at 2.95% from previous operations.
The fresh fund injection far exceeded two batches of such MLF loans that are set to expire in December, with a total volume of 600 billion yuan.
Markets also expect no change for the country’s benchmark loan prime rate (LPR) at its monthly fixing next Monday.
The central bank has made two cuts to the borrowing cost of MLF loans this year, with a total size of 30 basis points.
The PBOC said in the statement that the rollover was meant to keep “banking system liquidity reasonably ample”, and the fund injection “fully met financial institutions’ demand.”
In the same online statement, the PBOC also said it has injected another 10 billion yuan via seven-day reverse repos, with the rate unchanged.
The MLF, one of the PBOC’s main tools in managing longer-term liquidity in the banking system, serves as a guide for the LPR, which is set monthly using assessments from 18 banks.
Data also provided by Reuters
https://www.cnbc.com/2020/12/15/chinas- ... loans.html
Re: CHINA
REUTERS
"World Bank economist: China needs to learn to restructure emerging market debt"
By David Lawder, Karin Strohecker
January 12, 2021
(Reuters) - Increasing debt distress in emerging markets means that China, now the world’s largest official creditor, will need to start restructuring debts in the same way that Paris Club lenders did in past crises, World Bank Chief Economist Carmen Reinhart told the Reuters Next conference on Tuesday.
“What I think China will need to do to confront this is what previous other creditors in the past had done, which is you have to restructure."
"And restructure big time, meaning either lower interest rates, longer maturities, write-off in principal or some combination of that,” Reinhart said in a panel discussion on economic inequality.
She said that during the COVID-19 pandemic, China would need to take on a “new role” that has been an “old role” for Paris Club lenders, as Beijing is now facing for the first time wider spreads and difficulties in countries’ ability to service debt on a broad scale.
China has signed up to a G20 debt suspension initiative that allows up to 73 of the world’s poorest countries to halt payments on official bilateral debts to help fund critical health initiatives, and it has agreed to a further G20 debt restructuring framework.
“The real challenge is next, when we move to the stage where you have real writedowns to contend with,” said Reinhart.
Reinhart, a Harvard economist who joined the World Bank in June 2020, has researched and written extensively on financial crises.
Last year, she co-authored a scholarly paper here on China's overseas lending that found that as much as 50% of it is not reported to the World Bank or International Monetary Fund.
World Bank President David Malpass has warned that without more permanent debt relief, more people in developing countries will slide back into poverty and a repeat of the disorderly defaults of the 1980s could occur.
He has pressed China for full participation in the debt relief efforts, including on debt issued by state-owned enterprises.
Emerging market defaults in Latin America and east Asia led to broad-based debt cancellation efforts such as the Brady plan in the late 1980s and the Heavily Indebted Poor Countries (HIPC)initiative in the 1990s.
Asked if another such HIPC initiative were needed, Reinhart said: “I don’t think we’re there yet,” noting that the G20 common framework for debt restructuring takes more of a case-by-case approach.
“Whether at a later date, one can get creditors to sign on to another initiative, whether it’s HIPC-like or Brady-like or whatever form it takes, I don’t see that happening over the very near term.”
She said that both Paris Club creditors and China may have difficulties with such a broad based initiative, which cleared countries’ balance sheets, but allowed them to increase borrowing again.
"You ask what it takes to get rid of those cycles - I wish I knew," she said, noting that her 2009 book here with Harvard economist Kenneth Rogoff, "This Time Is Different: Eight Centuries of Financial Folly" chronicles repeated boom-bust cycles in dozens of countries.
For more coverage from the Reuters Next conference please click here or here
Reporting by David Lawder and Karin Strohecker; Editing by Lisa Shumaker and Rosalba O’Brien
https://www.reuters.com/article/worldba ... SL1N2JN2D9
"World Bank economist: China needs to learn to restructure emerging market debt"
By David Lawder, Karin Strohecker
January 12, 2021
(Reuters) - Increasing debt distress in emerging markets means that China, now the world’s largest official creditor, will need to start restructuring debts in the same way that Paris Club lenders did in past crises, World Bank Chief Economist Carmen Reinhart told the Reuters Next conference on Tuesday.
“What I think China will need to do to confront this is what previous other creditors in the past had done, which is you have to restructure."
"And restructure big time, meaning either lower interest rates, longer maturities, write-off in principal or some combination of that,” Reinhart said in a panel discussion on economic inequality.
She said that during the COVID-19 pandemic, China would need to take on a “new role” that has been an “old role” for Paris Club lenders, as Beijing is now facing for the first time wider spreads and difficulties in countries’ ability to service debt on a broad scale.
China has signed up to a G20 debt suspension initiative that allows up to 73 of the world’s poorest countries to halt payments on official bilateral debts to help fund critical health initiatives, and it has agreed to a further G20 debt restructuring framework.
“The real challenge is next, when we move to the stage where you have real writedowns to contend with,” said Reinhart.
Reinhart, a Harvard economist who joined the World Bank in June 2020, has researched and written extensively on financial crises.
Last year, she co-authored a scholarly paper here on China's overseas lending that found that as much as 50% of it is not reported to the World Bank or International Monetary Fund.
World Bank President David Malpass has warned that without more permanent debt relief, more people in developing countries will slide back into poverty and a repeat of the disorderly defaults of the 1980s could occur.
He has pressed China for full participation in the debt relief efforts, including on debt issued by state-owned enterprises.
Emerging market defaults in Latin America and east Asia led to broad-based debt cancellation efforts such as the Brady plan in the late 1980s and the Heavily Indebted Poor Countries (HIPC)initiative in the 1990s.
Asked if another such HIPC initiative were needed, Reinhart said: “I don’t think we’re there yet,” noting that the G20 common framework for debt restructuring takes more of a case-by-case approach.
“Whether at a later date, one can get creditors to sign on to another initiative, whether it’s HIPC-like or Brady-like or whatever form it takes, I don’t see that happening over the very near term.”
She said that both Paris Club creditors and China may have difficulties with such a broad based initiative, which cleared countries’ balance sheets, but allowed them to increase borrowing again.
"You ask what it takes to get rid of those cycles - I wish I knew," she said, noting that her 2009 book here with Harvard economist Kenneth Rogoff, "This Time Is Different: Eight Centuries of Financial Folly" chronicles repeated boom-bust cycles in dozens of countries.
For more coverage from the Reuters Next conference please click here or here
Reporting by David Lawder and Karin Strohecker; Editing by Lisa Shumaker and Rosalba O’Brien
https://www.reuters.com/article/worldba ... SL1N2JN2D9
Re: CHINA
CNBC
"China’s central bank warns of financial risks, including potential defaults"
Evelyn Cheng @chengevelyn
Published Thu, Apr 1 2021
Key Points
* China’s central bank warned on Thursday of financial risks in the country that have accumulated over the years, as well as shocks from overseas uncertainties.
* The detailed comments mark the latest warning from high-level officials in China in recent weeks about domestic market risks.
BEIJING — China’s central bank warned on Thursday of financial risks in the country that have accumulated over the years, as well as shocks from overseas uncertainties.
These risks include “oscillation” in the stock and fixed income markets and potential bond defaults in real estate companies, said Zou Lan, director of the People’s Bank of China’s financial markets department.
The detailed comments mark the latest warning from high-level officials in China in recent weeks about domestic market risks.
The Shanghai composite is little changed for the year, while the S&P 500 has climbed more than 5%
The coronavirus pandemic and high volatility in international capital flows have also shocked the domestic financial market, Zou told reporters.
Risk of defaults is ‘rather high’
“The stock, bond and commodities markets face oscillation risks,” he said, according to a CNBC translation of his Mandarin-language remarks.
“A small number of large-scale enterprise groups are still in a period of risks being exposed, middle and low-quality enterprises still face financing difficulties, and the risk of default is rather high.”
Zou added that pressure from rising house prices in some “hot” cities is relatively large, and the potential of debt default and other risks among highly leveraged medium-sized and small real estate businesses is worth watching.
The Chinese government announced last month it will target GDP growth of over 6% this year.
Many economists said the conservative target gives policymakers the ability to address long-term problems such as a buildup of debt.
China’s debt-to-GDP ratio rose to 285% as of the end of the third quarter of 2020, up from an average of 251% between 2016 to 2019, according to a report from Allianz, citing analysis from its subsidiary Euler Hermes.
Among signs that authorities have started to get serious about domestic risks, some state-owned enterprises defaulted on their debt last year — very rare for companies that investors believed had implicit government support.
But in the housing market, Beijing has struggled to limit speculation.
New home prices rose by their fastest rate in five months in February, according to Reuters.
Officials from the People’s Bank of China at Thursday’s press conference maintained that monetary policy would remain stable and supportive.
Zou did not give specific details on how the financial risks he mentioned would be addressed.
Data also provided by Reuters
https://www.cnbc.com/2021/04/01/chinas- ... lainternal
"China’s central bank warns of financial risks, including potential defaults"
Evelyn Cheng @chengevelyn
Published Thu, Apr 1 2021
Key Points
* China’s central bank warned on Thursday of financial risks in the country that have accumulated over the years, as well as shocks from overseas uncertainties.
* The detailed comments mark the latest warning from high-level officials in China in recent weeks about domestic market risks.
BEIJING — China’s central bank warned on Thursday of financial risks in the country that have accumulated over the years, as well as shocks from overseas uncertainties.
These risks include “oscillation” in the stock and fixed income markets and potential bond defaults in real estate companies, said Zou Lan, director of the People’s Bank of China’s financial markets department.
The detailed comments mark the latest warning from high-level officials in China in recent weeks about domestic market risks.
The Shanghai composite is little changed for the year, while the S&P 500 has climbed more than 5%
The coronavirus pandemic and high volatility in international capital flows have also shocked the domestic financial market, Zou told reporters.
Risk of defaults is ‘rather high’
“The stock, bond and commodities markets face oscillation risks,” he said, according to a CNBC translation of his Mandarin-language remarks.
“A small number of large-scale enterprise groups are still in a period of risks being exposed, middle and low-quality enterprises still face financing difficulties, and the risk of default is rather high.”
Zou added that pressure from rising house prices in some “hot” cities is relatively large, and the potential of debt default and other risks among highly leveraged medium-sized and small real estate businesses is worth watching.
The Chinese government announced last month it will target GDP growth of over 6% this year.
Many economists said the conservative target gives policymakers the ability to address long-term problems such as a buildup of debt.
China’s debt-to-GDP ratio rose to 285% as of the end of the third quarter of 2020, up from an average of 251% between 2016 to 2019, according to a report from Allianz, citing analysis from its subsidiary Euler Hermes.
Among signs that authorities have started to get serious about domestic risks, some state-owned enterprises defaulted on their debt last year — very rare for companies that investors believed had implicit government support.
But in the housing market, Beijing has struggled to limit speculation.
New home prices rose by their fastest rate in five months in February, according to Reuters.
Officials from the People’s Bank of China at Thursday’s press conference maintained that monetary policy would remain stable and supportive.
Zou did not give specific details on how the financial risks he mentioned would be addressed.
Data also provided by Reuters
https://www.cnbc.com/2021/04/01/chinas- ... lainternal
Re: CHINA
REUTERS
"Analysis-China's banks are bursting with dollars, and that's a worry"
By Winni Zhou, Tom Westbrook
JUNE 1, 2021
SHANGHAI/SINGAPORE (Reuters) - A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.
Boosted by surging export receipts and investment flows, the value of foreign cash deposits in China’s banks leapt above $1 trillion for the first time in April, official data shows.
A previous jump, late in 2017, preceded heavy dollar selling which turbocharged a steep yuan rally in early 2018.
Market participants say the size of the even bigger hoard this time raises that risk, and leaves policymakers’ efforts to restrain the yuan vulnerable to the whims of the exporters and foreign investors who own the cash.
“This positioning in particular, in our view, is susceptible to a capitulation if the broad dollar downtrend were to continue,” said UBS’ Asia currency strategist Rohit Arora, especially if the yuan gains past 6.25 or 6.2 per dollar.
“We think a break of these levels ... has the ability to affect market psyche,” he said, since they represent, roughly, the yuan’s 2018 peak and its top before a devaluation in 2015, and trigger selling from local corporations in particular.
The heavily managed yuan is at three-year highs, having rallied through major resistance at 6.4 per dollar, and it clocked its best month since November in May.
Concerned this rapid rise could unleash huge conversion of the deposits into yuan, the People’s Bank of China (PBOC) said on Monday that from mid-June, banks must set aside more reserves against them to discourage further accumulation.
STATE RESTRAINT
The central bank’s stance marked a shift towards confronting a trend that gathered steam while the bank had, publicly at least, kept to the sidelines.
Since 2017, the PBOC has largely left the yuan to market forces, keeping its currency reserves just above the $3 trillion mark, while behind the scenes the state-bank and private sectors stepped in.
Over the 16 months to April, dollar deposits rose by $242.2 billion, PBOC data shows, a rise equal to about 1.8% of gross domestic product and bigger than the much-vaunted inflows into China’s bond market, which totalled about $220 billion for the period.
Even as the country’s trade surplus ballooned during the pandemic and the banking system converted $254 billion into yuan for clients, the People’s Bank of China drained just $90.2 billion from the financial system over those months.
“The private sector has overtaken the central bank to absorb excess U.S. dollar liquidity generated by the corporates and foreign investment inflows,” said HSBC’s global FX strategists, led by Paul Mackel, in a note published on Monday.
That could also reflect the private sector’s view that the yuan is near a peak, or that it is preparing for future payments such as dividends and overseas investment, they added.
PRESSURE
Raw economics can explain the accumulation: China is running the world’s largest current account surplus, and government data shows about half the dollar deposits are held by local companies that have boomed with demand for their exports.
The same outperformance has attracted global capital, which has poured into a stockmarket riding on the pandemic recovery and credit markets paying better yields than other big economies because policy settings have begun to tighten.
Yet these factors provide little guarantee of the cash pile’s longevity, especially as they meet with a fearsome shift in the dollar/yuan exchange rate, which has fallen 11% in a year.
To be sure, plenty of currency traders think that makes sustained further dollar drops unlikely.
UBS’ Arora and HSBC’s Mackel both reckon a drop to 6.25 per dollar is possible, but that a recovery follows - to around current levels of 6.38 by year’s end for Arora and for Mackel to around 6.60 by end 2021.
Most also reckon the central bank will not tolerate further gains and cite jawboning from officials to cool the rally and the move to tamp down on dollar liquidity, by raising banks’ reserves ratio, as evidence of its resolve.
Onshore banking sources said that demand for new dollar loans was dire, even at rock-bottom rates - and data shows the value of deposits overhauling loans in December.
“How this has changed over the past few years has been quite phenomenal,” said Patrick Law, head of north Asia local markets and Asia non-deliverable forwards at Bank of America in Hong Kong.
“Last year was the first in over a decade or more, that there were more foreign currency deposits than foreign currency loans and that imbalance has grown in 2021,” he said.
The one caveat that stops people from being too presumptuous - the currency has been a floating one for just 5 years and has seen such a combination of growth and policy settings only once before.
Still, global investors are keeping a wary eye.
“The pressure is there, there’s no question about that,” said Stuart Oakley, head of cash currency trading at Nomura in London.
“There are a lot of dollars building up onshore.”
Reporting by Winni Zhou in Shanghai and Tom Westbrook in Singapore.; Editing by Vidya Ranganathan and Barbara Lewis
https://www.reuters.com/article/us-chin ... SKCN2DD412
"Analysis-China's banks are bursting with dollars, and that's a worry"
By Winni Zhou, Tom Westbrook
JUNE 1, 2021
SHANGHAI/SINGAPORE (Reuters) - A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.
Boosted by surging export receipts and investment flows, the value of foreign cash deposits in China’s banks leapt above $1 trillion for the first time in April, official data shows.
A previous jump, late in 2017, preceded heavy dollar selling which turbocharged a steep yuan rally in early 2018.
Market participants say the size of the even bigger hoard this time raises that risk, and leaves policymakers’ efforts to restrain the yuan vulnerable to the whims of the exporters and foreign investors who own the cash.
“This positioning in particular, in our view, is susceptible to a capitulation if the broad dollar downtrend were to continue,” said UBS’ Asia currency strategist Rohit Arora, especially if the yuan gains past 6.25 or 6.2 per dollar.
“We think a break of these levels ... has the ability to affect market psyche,” he said, since they represent, roughly, the yuan’s 2018 peak and its top before a devaluation in 2015, and trigger selling from local corporations in particular.
The heavily managed yuan is at three-year highs, having rallied through major resistance at 6.4 per dollar, and it clocked its best month since November in May.
Concerned this rapid rise could unleash huge conversion of the deposits into yuan, the People’s Bank of China (PBOC) said on Monday that from mid-June, banks must set aside more reserves against them to discourage further accumulation.
STATE RESTRAINT
The central bank’s stance marked a shift towards confronting a trend that gathered steam while the bank had, publicly at least, kept to the sidelines.
Since 2017, the PBOC has largely left the yuan to market forces, keeping its currency reserves just above the $3 trillion mark, while behind the scenes the state-bank and private sectors stepped in.
Over the 16 months to April, dollar deposits rose by $242.2 billion, PBOC data shows, a rise equal to about 1.8% of gross domestic product and bigger than the much-vaunted inflows into China’s bond market, which totalled about $220 billion for the period.
Even as the country’s trade surplus ballooned during the pandemic and the banking system converted $254 billion into yuan for clients, the People’s Bank of China drained just $90.2 billion from the financial system over those months.
“The private sector has overtaken the central bank to absorb excess U.S. dollar liquidity generated by the corporates and foreign investment inflows,” said HSBC’s global FX strategists, led by Paul Mackel, in a note published on Monday.
That could also reflect the private sector’s view that the yuan is near a peak, or that it is preparing for future payments such as dividends and overseas investment, they added.
PRESSURE
Raw economics can explain the accumulation: China is running the world’s largest current account surplus, and government data shows about half the dollar deposits are held by local companies that have boomed with demand for their exports.
The same outperformance has attracted global capital, which has poured into a stockmarket riding on the pandemic recovery and credit markets paying better yields than other big economies because policy settings have begun to tighten.
Yet these factors provide little guarantee of the cash pile’s longevity, especially as they meet with a fearsome shift in the dollar/yuan exchange rate, which has fallen 11% in a year.
To be sure, plenty of currency traders think that makes sustained further dollar drops unlikely.
UBS’ Arora and HSBC’s Mackel both reckon a drop to 6.25 per dollar is possible, but that a recovery follows - to around current levels of 6.38 by year’s end for Arora and for Mackel to around 6.60 by end 2021.
Most also reckon the central bank will not tolerate further gains and cite jawboning from officials to cool the rally and the move to tamp down on dollar liquidity, by raising banks’ reserves ratio, as evidence of its resolve.
Onshore banking sources said that demand for new dollar loans was dire, even at rock-bottom rates - and data shows the value of deposits overhauling loans in December.
“How this has changed over the past few years has been quite phenomenal,” said Patrick Law, head of north Asia local markets and Asia non-deliverable forwards at Bank of America in Hong Kong.
“Last year was the first in over a decade or more, that there were more foreign currency deposits than foreign currency loans and that imbalance has grown in 2021,” he said.
The one caveat that stops people from being too presumptuous - the currency has been a floating one for just 5 years and has seen such a combination of growth and policy settings only once before.
Still, global investors are keeping a wary eye.
“The pressure is there, there’s no question about that,” said Stuart Oakley, head of cash currency trading at Nomura in London.
“There are a lot of dollars building up onshore.”
Reporting by Winni Zhou in Shanghai and Tom Westbrook in Singapore.; Editing by Vidya Ranganathan and Barbara Lewis
https://www.reuters.com/article/us-chin ... SKCN2DD412
Re: CHINA
REUTERS
"Analysis-China's banks are bursting with dollars, and that's a worry"
By Winni Zhou, Tom Westbrook
JUNE 1, 2021
SHANGHAI/SINGAPORE (Reuters) - A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.
Boosted by surging export receipts and investment flows, the value of foreign cash deposits in China’s banks leapt above $1 trillion for the first time in April, official data shows.
A previous jump, late in 2017, preceded heavy dollar selling which turbocharged a steep yuan rally in early 2018.
Market participants say the size of the even bigger hoard this time raises that risk, and leaves policymakers’ efforts to restrain the yuan vulnerable to the whims of the exporters and foreign investors who own the cash.
“This positioning in particular, in our view, is susceptible to a capitulation if the broad dollar downtrend were to continue,” said UBS’ Asia currency strategist Rohit Arora, especially if the yuan gains past 6.25 or 6.2 per dollar.
“We think a break of these levels ... has the ability to affect market psyche,” he said, since they represent, roughly, the yuan’s 2018 peak and its top before a devaluation in 2015, and trigger selling from local corporations in particular.
The heavily managed yuan is at three-year highs, having rallied through major resistance at 6.4 per dollar, and it clocked its best month since November in May.
Concerned this rapid rise could unleash huge conversion of the deposits into yuan, the People’s Bank of China (PBOC) said on Monday that from mid-June, banks must set aside more reserves against them to discourage further accumulation.
STATE RESTRAINT
The central bank’s stance marked a shift towards confronting a trend that gathered steam while the bank had, publicly at least, kept to the sidelines.
Since 2017, the PBOC has largely left the yuan to market forces, keeping its currency reserves just above the $3 trillion mark, while behind the scenes the state-bank and private sectors stepped in.
Over the 16 months to April, dollar deposits rose by $242.2 billion, PBOC data shows, a rise equal to about 1.8% of gross domestic product and bigger than the much-vaunted inflows into China’s bond market, which totalled about $220 billion for the period.
Even as the country’s trade surplus ballooned during the pandemic and the banking system converted $254 billion into yuan for clients, the People’s Bank of China drained just $90.2 billion from the financial system over those months.
“The private sector has overtaken the central bank to absorb excess U.S. dollar liquidity generated by the corporates and foreign investment inflows,” said HSBC’s global FX strategists, led by Paul Mackel, in a note published on Monday.
That could also reflect the private sector’s view that the yuan is near a peak, or that it is preparing for future payments such as dividends and overseas investment, they added.
PRESSURE
Raw economics can explain the accumulation: China is running the world’s largest current account surplus, and government data shows about half the dollar deposits are held by local companies that have boomed with demand for their exports.
The same outperformance has attracted global capital, which has poured into a stockmarket riding on the pandemic recovery and credit markets paying better yields than other big economies because policy settings have begun to tighten.
Yet these factors provide little guarantee of the cash pile’s longevity, especially as they meet with a fearsome shift in the dollar/yuan exchange rate, which has fallen 11% in a year.
To be sure, plenty of currency traders think that makes sustained further dollar drops unlikely.
UBS’ Arora and HSBC’s Mackel both reckon a drop to 6.25 per dollar is possible, but that a recovery follows - to around current levels of 6.38 by year’s end for Arora and for Mackel to around 6.60 by end 2021.
Most also reckon the central bank will not tolerate further gains and cite jawboning from officials to cool the rally and the move to tamp down on dollar liquidity, by raising banks’ reserves ratio, as evidence of its resolve.
Onshore banking sources said that demand for new dollar loans was dire, even at rock-bottom rates - and data shows the value of deposits overhauling loans in December.
“How this has changed over the past few years has been quite phenomenal,” said Patrick Law, head of north Asia local markets and Asia non-deliverable forwards at Bank of America in Hong Kong.
“Last year was the first in over a decade or more, that there were more foreign currency deposits than foreign currency loans and that imbalance has grown in 2021,” he said.
The one caveat that stops people from being too presumptuous - the currency has been a floating one for just 5 years and has seen such a combination of growth and policy settings only once before.
Still, global investors are keeping a wary eye.
“The pressure is there, there’s no question about that,” said Stuart Oakley, head of cash currency trading at Nomura in London.
“There are a lot of dollars building up onshore.”
Reporting by Winni Zhou in Shanghai and Tom Westbrook in Singapore.; Editing by Vidya Ranganathan and Barbara Lewis
https://www.reuters.com/article/us-chin ... SKCN2DD412
"Analysis-China's banks are bursting with dollars, and that's a worry"
By Winni Zhou, Tom Westbrook
JUNE 1, 2021
SHANGHAI/SINGAPORE (Reuters) - A mountain of dollars on deposit in China has grown so large that banks are struggling to loan the currency and traders say it poses a risk to official efforts to control a fast-rising yuan.
Boosted by surging export receipts and investment flows, the value of foreign cash deposits in China’s banks leapt above $1 trillion for the first time in April, official data shows.
A previous jump, late in 2017, preceded heavy dollar selling which turbocharged a steep yuan rally in early 2018.
Market participants say the size of the even bigger hoard this time raises that risk, and leaves policymakers’ efforts to restrain the yuan vulnerable to the whims of the exporters and foreign investors who own the cash.
“This positioning in particular, in our view, is susceptible to a capitulation if the broad dollar downtrend were to continue,” said UBS’ Asia currency strategist Rohit Arora, especially if the yuan gains past 6.25 or 6.2 per dollar.
“We think a break of these levels ... has the ability to affect market psyche,” he said, since they represent, roughly, the yuan’s 2018 peak and its top before a devaluation in 2015, and trigger selling from local corporations in particular.
The heavily managed yuan is at three-year highs, having rallied through major resistance at 6.4 per dollar, and it clocked its best month since November in May.
Concerned this rapid rise could unleash huge conversion of the deposits into yuan, the People’s Bank of China (PBOC) said on Monday that from mid-June, banks must set aside more reserves against them to discourage further accumulation.
STATE RESTRAINT
The central bank’s stance marked a shift towards confronting a trend that gathered steam while the bank had, publicly at least, kept to the sidelines.
Since 2017, the PBOC has largely left the yuan to market forces, keeping its currency reserves just above the $3 trillion mark, while behind the scenes the state-bank and private sectors stepped in.
Over the 16 months to April, dollar deposits rose by $242.2 billion, PBOC data shows, a rise equal to about 1.8% of gross domestic product and bigger than the much-vaunted inflows into China’s bond market, which totalled about $220 billion for the period.
Even as the country’s trade surplus ballooned during the pandemic and the banking system converted $254 billion into yuan for clients, the People’s Bank of China drained just $90.2 billion from the financial system over those months.
“The private sector has overtaken the central bank to absorb excess U.S. dollar liquidity generated by the corporates and foreign investment inflows,” said HSBC’s global FX strategists, led by Paul Mackel, in a note published on Monday.
That could also reflect the private sector’s view that the yuan is near a peak, or that it is preparing for future payments such as dividends and overseas investment, they added.
PRESSURE
Raw economics can explain the accumulation: China is running the world’s largest current account surplus, and government data shows about half the dollar deposits are held by local companies that have boomed with demand for their exports.
The same outperformance has attracted global capital, which has poured into a stockmarket riding on the pandemic recovery and credit markets paying better yields than other big economies because policy settings have begun to tighten.
Yet these factors provide little guarantee of the cash pile’s longevity, especially as they meet with a fearsome shift in the dollar/yuan exchange rate, which has fallen 11% in a year.
To be sure, plenty of currency traders think that makes sustained further dollar drops unlikely.
UBS’ Arora and HSBC’s Mackel both reckon a drop to 6.25 per dollar is possible, but that a recovery follows - to around current levels of 6.38 by year’s end for Arora and for Mackel to around 6.60 by end 2021.
Most also reckon the central bank will not tolerate further gains and cite jawboning from officials to cool the rally and the move to tamp down on dollar liquidity, by raising banks’ reserves ratio, as evidence of its resolve.
Onshore banking sources said that demand for new dollar loans was dire, even at rock-bottom rates - and data shows the value of deposits overhauling loans in December.
“How this has changed over the past few years has been quite phenomenal,” said Patrick Law, head of north Asia local markets and Asia non-deliverable forwards at Bank of America in Hong Kong.
“Last year was the first in over a decade or more, that there were more foreign currency deposits than foreign currency loans and that imbalance has grown in 2021,” he said.
The one caveat that stops people from being too presumptuous - the currency has been a floating one for just 5 years and has seen such a combination of growth and policy settings only once before.
Still, global investors are keeping a wary eye.
“The pressure is there, there’s no question about that,” said Stuart Oakley, head of cash currency trading at Nomura in London.
“There are a lot of dollars building up onshore.”
Reporting by Winni Zhou in Shanghai and Tom Westbrook in Singapore.; Editing by Vidya Ranganathan and Barbara Lewis
https://www.reuters.com/article/us-chin ... SKCN2DD412
Re: CHINA
REUTERS
"Foreign holdings of U.S. Treasuries rise in April as rates stabilize -data"
By Gertrude Chavez-Dreyfuss
JUNE 15, 2021
NEW YORK, June 15 (Reuters) - Foreign holdings of Treasuries rose in April, data from the Treasury Department showed on Tuesday, as investors bought back U.S. government debt after yields started to decline from their highs.
Major foreign holders of Treasuries held $7.070 trillion in Treasuries in April, up from $7.028 trillion in March.
Japan, the largest foreign holder of U.S. sovereign paper, led the way, increasing its holdings to $1.276 trillion in April, from $1.24 trillion the previous month.
Japanese investors sold Treasuries in February and March as their holdings declined.
“It looks like Japanese investors sold into the sell-off and then bought once rates stabilized,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.
“In February and March, rates were higher and in April they were stabilizing near the peak, so it looks like they bought quite substantially,” he added.
U.S. benchmark 10-year Treasury yields started April with a yield of 1.679%, slipping to 1.631% by the end of that month.
China’s holdings, meanwhile, slid to $1.096 trillion from $1.1 trillion in March.
Its stock of Treasuries has declined for two straight months.
On a transaction basis, foreigners purchased $49.57 billion in Treasuries in April, after record inflows of $118.87 billion the previous month.
Data also showed U.S. corporate bonds had inflows of $10.14 billion in April, down from $43.1 billion in March, which was the largest since May 2008.
Foreign investors, meanwhile, sold $13.3 billion in U.S. equities in April, from purchases of $32.3 billion in March.
April’s U.S. stocks outflow was the first in 12 months.
U.S. residents decreased their holdings of long-term foreign securities, with net sales of $7.5 billion, according to the Treasury data.
Overall, net foreign acquisitions of U.S. long-term and short-term securities, as well as banking flows, fell to a net inflow of $101.2 billion in April, from $146.7 billion in March.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Lisa Shumaker and Dan Grebler)
https://www.reuters.com/article/usa-tre ... SL2N2NX2KV
"Foreign holdings of U.S. Treasuries rise in April as rates stabilize -data"
By Gertrude Chavez-Dreyfuss
JUNE 15, 2021
NEW YORK, June 15 (Reuters) - Foreign holdings of Treasuries rose in April, data from the Treasury Department showed on Tuesday, as investors bought back U.S. government debt after yields started to decline from their highs.
Major foreign holders of Treasuries held $7.070 trillion in Treasuries in April, up from $7.028 trillion in March.
Japan, the largest foreign holder of U.S. sovereign paper, led the way, increasing its holdings to $1.276 trillion in April, from $1.24 trillion the previous month.
Japanese investors sold Treasuries in February and March as their holdings declined.
“It looks like Japanese investors sold into the sell-off and then bought once rates stabilized,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York.
“In February and March, rates were higher and in April they were stabilizing near the peak, so it looks like they bought quite substantially,” he added.
U.S. benchmark 10-year Treasury yields started April with a yield of 1.679%, slipping to 1.631% by the end of that month.
China’s holdings, meanwhile, slid to $1.096 trillion from $1.1 trillion in March.
Its stock of Treasuries has declined for two straight months.
On a transaction basis, foreigners purchased $49.57 billion in Treasuries in April, after record inflows of $118.87 billion the previous month.
Data also showed U.S. corporate bonds had inflows of $10.14 billion in April, down from $43.1 billion in March, which was the largest since May 2008.
Foreign investors, meanwhile, sold $13.3 billion in U.S. equities in April, from purchases of $32.3 billion in March.
April’s U.S. stocks outflow was the first in 12 months.
U.S. residents decreased their holdings of long-term foreign securities, with net sales of $7.5 billion, according to the Treasury data.
Overall, net foreign acquisitions of U.S. long-term and short-term securities, as well as banking flows, fell to a net inflow of $101.2 billion in April, from $146.7 billion in March.
(Reporting by Gertrude Chavez-Dreyfuss; Editing by Lisa Shumaker and Dan Grebler)
https://www.reuters.com/article/usa-tre ... SL2N2NX2KV
Re: CHINA
CNBC
"Commodities from copper to corn tumble on China crackdown, rising dollar"
Jesse Pound @JESSERPOUND
PUBLISHED THU, JUN 17 2021
The prices of commodities were falling sharply on Thursday, cutting into months of gains and weighing on equity markets, as China takes steps to cool off rising prices and the U.S. dollar strengthens.
The decline in commodities was widespread, with futures prices for palladium and platinum falling more than 11% and 7%, respectively, along with declines of nearly 6% for corn futures and 4.8% for contracts tied to copper.
Oil prices were also down more than 1%.
Thursday’s move continued a slide that began earlier in the week, thanks in part to actions by Chinese regulators.
A Chinese government agency announced a plan on Wednesday to release reserves of key metals, including copper and aluminum, according to Reuters.
Officials in the country have also warned about speculation in financial markets in recent weeks.
“Base metals prices are melting as China’s State Council escalates its crackdown against commodity speculators and hoarders by investigating [state-owned enterprises]′ overseas positions and auditing futures firms to combat squeezed profit margins,” Daniel Ghali, TD Securities commodities strategist, said in a note.
“While overseas positions are harder to police with warnings, this crackdown still has some bite.”
The Federal Reserve’s increased projections for inflation and rate hikes from Wednesday also could be contributing to the decline by putting upward pressure on the dollar and signaling that the central bank is closely following the rise in prices.
The dollar index, which measures the greenback against a basket of currencies, has risen about 1.6% since the Fed’s updated projections were released.
Commodities often move inversely to the greenback since they are mostly priced in U.S. dollars globally.
“The US dollar is probably reacting to bond yields moving higher yesterday and the prospect of an earlier tapering which would slow the supply of US dollars and this has led to a sizable decline in commodity prices across the board,” Leuthold Group’s Jim Paulsen told CNBC.
“Commodities have been a popular investment in the last year as investors have been adding some portfolio protection against inflation.”
Additionally, UBS’ Art Cashin said on CNBC’s “Squawk on the Street” that the Chinese government tightening its monetary and fiscal policies could be creating selling pressure for commodities.
The fall comes after a strong first half of the year for commodities, fueled by increased industrial demand as the U.S. and other economies began to reopen as Covid cases declined.
That rapid increase in prices may have made some of the commodities markets ripe for a quick pullback.
Evercore ISI technical analyst Rick Ross said in a note on Thursday that copper appeared to be at its most “overbought” level since 2006.
The weakness for commodities rippled into the equity market on Thursday, taking a bite out of energy and mining stocks.
“Rumors since Mar that CN’s State Reserve Bureau (SRB) will release reserves of non-ferrous metals to market came true on June 16."
"Coupled with Fed’s rate decision on Jun 17 (post strong May PPI) sent most new energy material stocks plummeting, down 5-10% overnight,” investment firm Jefferies said in a note to clients.
Shares of the Global X Copper Miners ETF were down more than 7% in midday trading, while Alcoa and U.S. Steel shed 6.5% and 8%, respectively.
The commodities market had already seen unusual volatility in 2021 before the most recent sell-off, with lumber and corn being two examples of markets where prices had spiked to historic levels before losing steam.
Lumber futures, which have been sliding for more than a month, slipped an additional 1.8% on Thursday.
— CNBC’s Michael Bloom and Maggie Fitzgerald contributed to this report.
https://www.cnbc.com/2021/06/17/commodi ... ollar.html
"Commodities from copper to corn tumble on China crackdown, rising dollar"
Jesse Pound @JESSERPOUND
PUBLISHED THU, JUN 17 2021
The prices of commodities were falling sharply on Thursday, cutting into months of gains and weighing on equity markets, as China takes steps to cool off rising prices and the U.S. dollar strengthens.
The decline in commodities was widespread, with futures prices for palladium and platinum falling more than 11% and 7%, respectively, along with declines of nearly 6% for corn futures and 4.8% for contracts tied to copper.
Oil prices were also down more than 1%.
Thursday’s move continued a slide that began earlier in the week, thanks in part to actions by Chinese regulators.
A Chinese government agency announced a plan on Wednesday to release reserves of key metals, including copper and aluminum, according to Reuters.
Officials in the country have also warned about speculation in financial markets in recent weeks.
“Base metals prices are melting as China’s State Council escalates its crackdown against commodity speculators and hoarders by investigating [state-owned enterprises]′ overseas positions and auditing futures firms to combat squeezed profit margins,” Daniel Ghali, TD Securities commodities strategist, said in a note.
“While overseas positions are harder to police with warnings, this crackdown still has some bite.”
The Federal Reserve’s increased projections for inflation and rate hikes from Wednesday also could be contributing to the decline by putting upward pressure on the dollar and signaling that the central bank is closely following the rise in prices.
The dollar index, which measures the greenback against a basket of currencies, has risen about 1.6% since the Fed’s updated projections were released.
Commodities often move inversely to the greenback since they are mostly priced in U.S. dollars globally.
“The US dollar is probably reacting to bond yields moving higher yesterday and the prospect of an earlier tapering which would slow the supply of US dollars and this has led to a sizable decline in commodity prices across the board,” Leuthold Group’s Jim Paulsen told CNBC.
“Commodities have been a popular investment in the last year as investors have been adding some portfolio protection against inflation.”
Additionally, UBS’ Art Cashin said on CNBC’s “Squawk on the Street” that the Chinese government tightening its monetary and fiscal policies could be creating selling pressure for commodities.
The fall comes after a strong first half of the year for commodities, fueled by increased industrial demand as the U.S. and other economies began to reopen as Covid cases declined.
That rapid increase in prices may have made some of the commodities markets ripe for a quick pullback.
Evercore ISI technical analyst Rick Ross said in a note on Thursday that copper appeared to be at its most “overbought” level since 2006.
The weakness for commodities rippled into the equity market on Thursday, taking a bite out of energy and mining stocks.
“Rumors since Mar that CN’s State Reserve Bureau (SRB) will release reserves of non-ferrous metals to market came true on June 16."
"Coupled with Fed’s rate decision on Jun 17 (post strong May PPI) sent most new energy material stocks plummeting, down 5-10% overnight,” investment firm Jefferies said in a note to clients.
Shares of the Global X Copper Miners ETF were down more than 7% in midday trading, while Alcoa and U.S. Steel shed 6.5% and 8%, respectively.
The commodities market had already seen unusual volatility in 2021 before the most recent sell-off, with lumber and corn being two examples of markets where prices had spiked to historic levels before losing steam.
Lumber futures, which have been sliding for more than a month, slipped an additional 1.8% on Thursday.
— CNBC’s Michael Bloom and Maggie Fitzgerald contributed to this report.
https://www.cnbc.com/2021/06/17/commodi ... ollar.html