2018-05-24

Fed Rolls $6.1 B in Treasures, Assets Dip Only $0.3 Billion

The Fed rolled $0.3 billion off its balance sheet off its balance sheet in the week ended May 23. Treasuries were $6.1 billion of total. This week a big chunk came from Other Federal Reserve Assets at $8.4 billion. In a note the Fed describes says this "Includes accrued interest, which represents the daily accumulation of interest earned, and other accounts receivable. Also, includes Reserve Bank premises and equipment net of allowances for depreciation.

The S&P 500 Index gained 0.2 percent for the week. Charts will be added when FRED updates tomorrow.

Update: Total reserve assets only declined $0.3 billion for the week. This was a weak performance from stocks considering the Federal Reserve didn't meaningfully reduce assets. The Federal Reserve made large balance sheet reductions at the end of January, February, March and April. The Fed has $13.6 billion to roll off in May, but if it waits for the treasuries maturing on May 31, the next week (ending Wednesday) may see little in the way of reductions.

Wuhan Winning Talent War

Proportion of non-Hubei residents staying the city increased from 10 to 30 percent as the city fights to keep young talent amid a demographic decline.

iFeng: 武汉“抢才”半年吸引14万大学毕业生落户
It has been half a year since Wuhan started the “scramble for talent” war last year. The reporter learned from the Public Security Bureau of Wuhan Municipal Public Security Bureau that a total of approximately 140,000 university graduates eventually settled in Wuhan in the past six months. Among them, undergraduates accounted for half of the graduates, highly educated Shuobo graduates settled in about 20,000 people. In addition, the proportion of non-Hubei households who settled in Wuhan rose from the original 10% to the current level of about 30%.
This would be happening in the United States as well, but capital has depressed labor with high rates of immigration.

Italy Gets a Government

Daily Mail: Little-known lawyer is confirmed at Italy's new Prime Minister despite CV scandal as president gives him the go-ahead to form government with far-right and anti-establishment parties
'I'm aware of the necessity to confirm Italy's place, both in Europe and internationally,' Mr Conte said after his approval.

His coalition planned a radical slate of economic policies including drastic tax cuts, a monthly basic income that will cost the budget €17 billion (£14.9 billion), and pension reform rollbacks.

The government programme, announced on Friday, also planned to speed up expulsions of illegal immigrants and crack down on trafficking.
Globalists cannot win if a single government breaks with the pack and finds success. Success for globalists/Eurocrats in Italy is GDP and equities back to 2005 levels. A great accomplishment because only a few years ago, they were at levels last seen in the late 1990s. If there's a recession and bear market coming, the Eurocrats will have achieved 20 years of stagnation in Italy. A true lost generation.

Nationalists don't have a high hurdle to clear. I'm not even sure they need to revive the economy. Delivering the same stagnation, but deporting migrants would be enough to make them more popular than the centrist parties. If they default on euro debts and that causes a deep recession, it might also be popular because people may not blame them for the pain, but accept it as the cost of getting out from under the European Central Bank.

More detail here: Alhambra: Italy Went Boom A Long Time Ago (and that’s the point)

Turkey Violates Greek Airspace 56 Times

Who says you can't go back to Constantinople?

ZH: Turkish Fighter Jets Violate Greek Airspace 56 Times In A Single Day

This is played down as a squabble between NATO allies, but Turkey and the EU are moving in opposite directions politically. Turkey is shifting in a more Islamic direction and Europe in a more nationalist direction. Europe's establishment has seeded Europe with jihadist, Europe's establishment is slowly being replaced.

This is the most dangerous flash point in Europe. And since Turkey is toast, lashing out with a military strike and appeal to wider Islam makes sense.

2018-05-23

Beijing Mortgage Volume Tumbles as Rates Rise

21st Century: 北京房贷飙涨行情:按揭贷款量跌价升,房企发债成本攀升
In a short period of one and a half years, Beijing’s real estate mortgage loan market experienced an increase in interest rates from a 20% discount on the benchmark interest rate (4.9% annualized) to 15%, 10%, 5%, no discounts on the basis, and then a 5% increase. Even today, there is a general increase of 10% (5.39% annualized) in the market.

A number of real estate analysts said that the main reason for the recent upward adjustment in mortgage rates is the rise in bank funding costs. According to data released by the Central Bank, the weighted average interest rates for inter-bank lending for the period from January to April this year were 2.78%, 2.73%, 2.74%, and 2.81%, respectively, and the overall trend was upward.

Regarding whether the interest rate on mortgage loans will be raised again afterwards, the credit business managers of many banks have indicated that they are not clear, but this possibility is not ruled out.
Loan growth is plummeting:
According to the latest statistics released by the Beijing Business Management Department of the People's Bank of China in April, the statistics on Beijing's money and credit statistics also showed that at the end of April, the RMB loan balance of Beijing residents was 1.68 trillion yuan, an increase of 10.6% year-on-year, and an increase of 33.72 billion yuan over the beginning of the year. A decrease of 69.95 billion yuan over the same period of last year.
In other words, loan growth fell 67 percent. That credit deceleration will leave a market in the real estate sector and then the wider economy.
The capital chain is tight, and the price of overseas bond issuance rises

The cost of funds for people who buy a house is rising, and people who sell the house are not so comfortable.

With the limited financing of domestic real estate companies, the eyes of the housing enterprises have turned to overseas. According to wind data alone, from the beginning of 2018 to May 22, 2018, domestic real estate companies have announced plans to issue 61 gulf bonds, and the total issuance has exceeded 24 billion U.S. dollars, a substantial increase of about 105% from the same period last year.
The same thing happened during the last tightening/real estate crackdown cycle. Most borrowers may simply be rolling over existing foreign debt though:
In addition, although overseas channels for issuing bonds still exist, interest rates have shown a trend of soaring. For example, Hydoo International issued US$130 million in bonds on May 9, and interest rates have been as high as 12%. Landsea Green Group’s US$150 million green priority notes issued in April have interest rates as high as 9.62%. From the average cost point of view, the wind data shows that the average cost of issuing overseas bonds by housing enterprises from 2018 to present is 6.67%, which is 0.4% higher than the annual figure of 6.27% in 2017, and is a significant increase of 1.74 percentage points from 2016. .

On the other hand, from the perspective of the use of overseas bonds issued by real estate companies, most of them belong to the old and new. Wind data shows that in the second half of this year, overseas financing of real estate bonds expired at a scale of 56.475 billion yuan, and the expiry date in 2019 reached 143.695 billion yuan. The 130 million US dollars notes issued by Hydoo International also stated that most of them were used to repay debts.
The last cyclical downturn was aborted when China restarted credit growth and the U.S. Dollar Index peaked.

Turkey Plug Being Pulled From EM Bathtub

AFP: Turkey lira 'in freefall', eyes on central bank
Turkey's embattled lira on Wednesday lost over 3.5 percent in value to hit new historic lows against the US dollar, as markets watched to see if the central bank will take emergency action to buttress the currency.

Following sharp losses on Tuesday, the lira continued to underperform all other emerging market currencies, after suffering a hammering in Asian trade overnight when Japanese investors sold Turkish assets.
Wolf Street: Which European Bank is Most Exposed to Fallout in Turkey?
Like Spain’s biggest bank, Santander, BBVA has spent the last five years doubling down on its emerging economy bets, even as two of their biggest markets, Brazil and Turkey, have heated up politically and slowed economically.
Santander: TURKEY: FOREIGN INVESTMENT
After reaching a record high (USD 22 billion) in 2007, FDI flows to Turkey have decreased. FDI reached USD 13.3 billion in 2016 and dropped to USD 10.8 billion in 2017 according to Turkish Ministry of Economy (2018).The factors hindering FDI development include political instability (an attempted coup d'état took place in 2016 claiming many lives), the weak currency, inflation, the proximity to conflicts in the Middle East as well as administrative measures taken against the Gulenists for their alleged implication in the coup. Turkey is ranked 60th out of 190 economies by the World Bank in its Doing Business 2018 report (same ranking as in 2017).

EU member states are by the largest group of investors (67.9% of total investment in 2017) in Turkey

U.S. Dollar Approaches Resistance

2018-05-22

Bitcoin Support at $7k, Monero Weakest, Decred Strongest

Monero major support at $155, could be a major break coming up here. Decred adding privacy to compete with Monero may be playing a role because Monero's weakness is out of step with rest of cryptos. Litecoin and OmiseGo have similar charts. Bitcoin is the key, support at $7000.