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Strategies & Market Trends : John Pitera's Market Laboratory

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To: John Pitera who wrote (18508)	12/20/2016 5:15:12 PM
From: John Pitera	3 Recommendations Read Replies (1) of 33421

China currency, interest rate and potential for capital flight watch............ China1. As discussed before, monetary conditions in China have tightened in recent weeks. Concerned about the selloff in the domestic bond markets, the PBoC injected some liquidity into the markets last week. Nonetheless, the interbank rate continues to move higher: here is the one-week SHIBOR. 2. China’s bonds remain under pressure, with the selloff now hitting the short-end of the curve. Below are the 5yr and the 1yr government bond yields. 3. Corporate bond yields also rose as rumors circulate about redemptions from wealth management products (WMPs) who hold a great deal of China’s corporate debt (often leveraged). 4. China’s stock market is moving lower partially in response to the news that the housing rally has stalled (discussed yesterday). 5. In Hong Kong, the renminbi funding markets remain tight, with the 3-month CNH (offshore renminbi) HIBOR hitting the highest level since January. The second chart below shows the CNH HIBOR curve – now and a month ago. 6. The Hong Kong dollar (HKD) HIBOR is also on the rise as it converges with the US dollar LIBOR. Source: Bloomberg; Further reading 7. The USD/HKD risk reversal continues to rise as traders once again put on bets that the Hong Kong Monetary Authority will give up the peg to the dollar. Back to Index Emerging Markets1. The assassination of the Russian ambassador in Turkey put investors further on edge, sending the lira lower again. Source: BBC; Read full article

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