Two Different: Views, Appetites and Yuans
Two different views.
Re: BWLD - "The flagship menu item cost Buffalo Wild Wings $1.79 per pound in Q3, or a 19% increase over the same period last year. Cost of labor also climbed 24.1% year over year."
And Social Security payments? No increase. Reason: inflation is tame. And Medicare? Rates increased. Reason: inflated costs. So, repeat after me, inflation is tame and below our 2% target, LMAOROFLTwo different appetites.
ETF BKLN - Yo Brooklyn is a proxy for risk aversion or credit market tightening for US Corporate top 100 HY floating rate loans. Look where it is right now, almost back to 10/2 and 8/25 lows.
On the other hand, JNK - the proxy for junk bonds is still floating around its 8/25 low but well above its 10/2 low.
So at higher grade corporate HY buffet, takers are waning, while some are taking flyers on the garbage can buffet of junk.
Too different Yuan's
USDCNY - did anyone notice the onshore RMB went from 6.36 to 6.31 yesterday? Since the 08/11 ONSHORE deval 6.21 to 6.44, the yuan has clawed back 13 of the 23 points it gave up.
Meanwhile, offshore went from 6.20 to 6.59, then to 6.40, last two days down to 6.31, clawing back 28 of the 39 points it gave up.
Offshore, the RMB has risen 1.8% since Aug, the most since 2011. The Hong Kong Monetary Authority bought the most U.S. dollars in six years . Did someone say China is loosening? They are not loosening in a debaucherous sense. Forget the interest rate cut, by lowering reserve requirements, removing Reg-Q interest payment ceilings on deposits and cutting repo rates they are admitting that their intrabank IBDD deposits or systemic lending is drying up, i.e. they have a liquidity problem.
People and banks are hoarding or expatriating their holdings, i.e. capital flight. It is massive and as a result they have an RMB liquidity issue, on and off shore. Much like the Fed has little control over the Eurodollar market, it is the off shore activity, or that Asian "dollar" outside of their purview that is going to get very interesting and shortly.
Think forward swaps USD/CNY the PBOC has on their asset sheet, and the ones they don't, that their banks are still holding, but they are on the hook for. For the dance of kicking the can forward, that piper must at some point be paid.
Comments