China's consumer and producer prices both declined in July for the first time since November 2020, a sign of deflation pressure amid weakening demand
CPI dipped 0.3% from a year earlier while PPI retreated for a 10th consecutive month, sliding 4.4%. "China is in deflation for sure," said Robin Xing at Morgan Stanley. "The question is how long." The statistics bureau attributed the CPI decline to the high base of comparison, saying the dip is likely to be temporary. Source: J-C Gand
China's Inward Foreign Direct Investment Falls To The Lowest Level On Record...
Indeed, Inward FDI fell further in Q2: The preliminary Q2 Balance of Payments (BOP) data released last week showed China's current account still enjoys a healthy surplus, but the financial account continues to see notable net outflows. In particular, inward Foreign Direct Investment (FDI) fell to the lowest level since the series started in 1998. Source: SAFE, www.zerohedge.com
This could be a problem for sugar prices which already hit 12-year highs back in May
Source: Barchart
Which Countries Hold the Most U.S. Debt (which just got downgraded)?
With $1.1 trillion in Treasury holdings, #japan is the largest foreign holder of U.S. debt. Japan surpassed China as the top holder in 2019 as China shed over $250 billion, or 30% of its holdings in four years. the United Kingdom is the third highest holder, at over $655 billion in Treasuries. Across Europe, 13 countries are notable holders of these securities, the highest in any region, followed by Asia-Pacific at 11 different holders. A handful of small nations own a surprising amount of U.S. debt. With a population of 70,000, the Cayman Islands own a towering amount of Treasury bonds to the tune of $284 billion. There are more hedge funds domiciled in the Cayman Islands per capita than any other nation worldwide. In fact, the four smallest nations in the visualization above—Cayman Islands, Bermuda, Bahamas, and Luxembourg—have a combined population of just 1.2 million people, but own a staggering $741 billion in Treasuries. Source: Visual Capitalist
The Bank of Japan had to intervene twice this week to slow gains in govt bond yields, underscoring its determination to curb sharp moves in rates.
Nevertheless, the 10y Japanese yield has skyrocketed to 0.65%, well above the 0.5% from the YCC. Source: Bloomberg, HolgerZ
China's currency regulators are asking some commercial banks to reduce or postpone their purchases of U.S. dollars
That is in order to slow the yuan's depreciation, two people with direct knowledge of the matter said. The informal instruction, or the so-called window guidance, is the latest in a series of steps taken by authorities this year to bolster a currency that has been hit by China's faltering post-pandemic economic recovery and rising yields for the U.S. dollar and other major currencies. Source: Reuters
Tokyo core-core CPI inflation printed at +0.575% MoM
That's the 2nd biggest monthly increase since Covid. And one of the biggest monthly increases over the last 30 years outside of sales tax hikes. Inflation is not transitory in Japan... $JPY. Source: Viraj Patel, Vanda Research
There it is. The BoJ adjusts Yield Curve Control (YCC)
Japan’s central bank on Friday pledged greater flexibility in yield curve control policy, while keeping its ultra loose interest rate intact and revising its median consumer inflation forecast upward for the current fiscal year. - The Bank of Japan added it will offer to purchase 10-year JGBs at 1% every business day through fixed-rate operations, unless no bids are submitted — a move that effectively expands its tolerance by a further 50 basis points. - In a policy statement, the Bank of Japan said it will “continue to allow 10-year JGB yields to fluctuate in the range of around plus and minus 0.5 percentage points from the target level.” - “While it will conduct yield curve control with greater flexibility, regarding the upper and lower bounds of the range as references, not as rigid limits, in its market operations,” it added. - Still, the BOJ held its short-term interest rate target at -0.1% after a two-day meeting. It also raised its median forecast for inflation to 2.5% for fiscal 2023 after its July meeting, up from its 1.8% prediction in April. Market reaction? The Japanese yen strengthened and 10-year JGB yield rose after the Bank of Japan statement: - Yields for 10-year Japanese government bonds rose to 0.575% for the first time since September 2014. - The yen was trading at 138.64 against the dollar at 12:35p.m. Hong Kong and Singapore time. Source: Viraj Patel, CNBC, Bloomberg
