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Two Chinese Bond Auctions Fail

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Two Chinese Bond Auctions Fail

And while the US is no longer allowed to auction off debt, in China the PBoC appears to be no longer able to auction off debt. As Business China reports, "the central bank scheduled the auction of RMB 20 billion worth of one-year treasury bonds and RMB 10 billion in six-month bonds on the country’s interbank bond market for May 13. But banks, faced with tight liquidity, only purchased RMB 11.71 billion worth of one-year bonds and RMB 9.63 billion worth of six-month bonds, the report said." In other words, there was a nearly 50% miss on the 3 month auction. The key reason: "The reference yield of one-year treasury bonds was raised to 3.0246% from the previous issuance, while the bond yield of 182-day discounted treasury bonds was 2.91%, the paper said." It appears investors don't agree with the central planners that 3% is an appropriate rate to compensate them for surging inflation. That, and also the fact that banks suddenly have no liquidity: "Tighter liquidity was behind the under-subscription, as the central bank resumed selling three-year notes on May 12 after a hiatus of more than five months, a bank analyst who was not named was cited as saying. The central bank also raised banks’ RRRs by 0.5 percentage points on the same day, effective May 18, the fifth consecutive month its has raised RRRs this year." And so the Catch 22 emerges: the more China fights inflation through RRR or rate hikes, the lower the purchasing power of domestic banks to purchase bonds (and yes, the US deficit is just a few hundred billions dollars too wide for it to come to China's rescue). Should the "15 minute" inflationary conundrum continue to express itself, and China be forced to rise rates even longer, very soon the country, just like the US to which it is pegged monetarily, will also be unable to raise any incremental capital.

http://www.telegraph.co.uk/finance/economics/8506300/Chinese-inflation-eases-off-32-month-high.html

The country's consumer price index rose 5.3pc year on year in April, down from 5.4pc in March but well above Beijing's official four-percent target for 2011.

So inflation at 5.3pc and interest on govt bonds at 3%, and you have a govt target of 4%. Still I'm sure it doesn't matter, clearly lending to the Chinese govt at a loss is something no investor can truly resist.

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Two Chinese Bond Auctions Fail

http://www.telegraph.co.uk/finance/economics/8506300/Chinese-inflation-eases-off-32-month-high.html

So inflation at 5.3pc and interest on govt bonds at 3%, and you have a govt target of 4%. Still I'm sure it doesn't matter, clearly lending to the Chinese govt at a loss is something no investor can truly resist.

Was that the sound of a shoe hitting the floor?

I could have sworn I heard another one a while ago.

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Two Chinese Bond Auctions Fail

http://www.telegraph.co.uk/finance/economics/8506300/Chinese-inflation-eases-off-32-month-high.html

So inflation at 5.3pc and interest on govt bonds at 3%, and you have a govt target of 4%. Still I'm sure it doesn't matter, clearly lending to the Chinese govt at a loss is something no investor can truly resist.

Think the Chinese better start taking a leaf out of the US, UK, and Eurozone's book and start printing like mad to buy their own bonds. Failed auctions will be a thing of the past! :lol:

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They could always hike the peg.

Inflation is their choice, and they're still running deeply neg. real policy rates.

It'll all end in tears for them soon enough.

Hey ho.

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  • 312 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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