Market update: Traders rattled by China supposedly not buying US bonds, Venezuela closer to collapsing

11 Jan

by Mihály Tatár


Good Morning!


  • A single newsline dominated Wednesday’s trading: Bloomberg reported that China is considering ’slowing or halting US Treasury bond purchases’. This created a small panic (stocks dropped, bond yields jumped – the US 10Y yield to 2.60%, the Dollar weakened over 1.20 against the Euro), and an army of analysts found it necessary to write about China finally taking revenge on the Trump Administration – until China’s mighty State Administration of Foreign Exchange (SAFE) came in and called the report ’fake news’. This accelerated the already U-turning movements (SPX -0.11%, Nasdaq -0.14%, DAX -0.78%, Nikkei -0.45%, Shanghai +0.04%, EURUSD 1.1940, US 10Y 2.53%), and traders returned their attention to US inflation developments. (It’s worth mentioning, because the ’China can blackmail the US’ story is so widespread and accepted – it was popular even when I was a student – that while China could indeed cause large swings in bond markets, pension funds around the world would just love, love to see higher US yields, and would go on a buying spree if it happened. Currently, almost all pension systems – from Moscow through Berlin to Tokyo – are brutally under-earning compared to the demographic trends.) The excitement almost pushed away the real developments: The Canadian Dollar, the Mexican Peso and several companies from General Motors to Pacific Railway plunged after the Canadian government admitted that the US may indeed leave NAFTA (why is everyone surprised?) and cryptocurrencies dropped like a stone (Bitcoin -8% to 12,800 USD, or -30% from December), on reports that South Korean police are raiding Bitcoin exchanges and the country plans to ban cryptocurrency trading. (To get a feel what a mania cryptocurrency trading has become: The Asian is adding 240,000 new users every hour, or a couple of  million every week – to the point that the company had to limit new customer registration for a few days.)


  • As a fresh reminder of the virtues of socialism, Venezuela’s oil production just plummeted to 1.7 mio barrels per day – the lowest in 28 years. (Just when oil prices are approaching their 3 year high.) I guess this can happen when a brigadier general of the National Guard is named as the oil minister. Currently the whole region is extremely worried about when the country finally collapses – Maduro’s ’petros’ oil-backed-cryptocurrency may be the last kick – resulting in chaos at the borders and a humanitarian crisis. (Already the average worker earns a mere 7000 calories worth of salary a day). Many talk about a united military intervention led by the US – but for me it seems that the public interest is not there – the US media is preoccupied with whether Oprah would be a good president (I would just love to see her take on Putin or Xi), whether the prince kissing Snow White in the tale is rape (I am not kidding, this is a theme), in the UK, to create ’a plastic bag free future’ to ’end maritime suffering’, and in South Korea and China, of course, to build aircraft carriers and ballistic missiles (China just started building its third).


Have a nice day,



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