The ‘Bond’ Market

This is not a post on Fixed Income markets. It refers to the ‘action straightaway’ mode in China stocks as in Bond movies. Bond movies start with a hot chase straightaway.

The stock market in China started off with a bang on Jan. 4. Down 7%; circuit breakers, ban on sales, etc. followed ritualistically and mechanically. Comical to call this a market economy. On Jan. 7, the China stocks are down 5% again, as I write this. The stock market is closed again, for the second time this week. China stocks are still very expensive.

FT reported that China Yuan onshore and offshore pricing widened. Offshore markets expect a faster and larger yuan depreciation. Surprised? Not ‘The Gold Standard’.  People’s Bank of China fixed the yuan lower on Jan. 7. Bloomberg screamed that the yuan has sunk to a 5-year low.

The strategist at Mizuho Bank had not been properly briefed (or, was?) by his bosses, perhaps. His comments:

It looks like that they set it in an arbitrary way and the mechanism is not consistent with their policy guidelines. This obviously undermines the PBOC’s policy credibility and investor confidence in the China market. [Link]

Of course, the yuan deserved to be included in the Special Drawing Rights of the International Monetary Fund.

China’s Services Sector Purchasing Managers’ index (PMI) from Caixin (a private sector compiler) showed the index at the second lowest reading in a decade. China’s official non-manufacturing PMI, however, rose to 54.4, highest since August 2014. Isn’t that very strange? (hint: sarcasm).

Stephen Roach provided comical relief putting whatever little credibility he has left on China, to risk, by rubbishing the China ‘hard landing’ school. This blogger is one of them. Of course, we are broken clocks.

If Roach’s comic relief did not tickle you enough, you may wish to try Martin Wolf in FT (could be behind a paywall though).

Dmitry Orlov appears to be a player in the same ballpark as I am, as far as the global economic outlook is concerned. Thanks to a friend’s email, I discovered him and his blog. This post is my cup of tea.


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