Weekly Commentary: Bipolar And The Q2 2021 Z.1

It was a rather glaring warning. Yet it was, of course, taken as just another buying opportunity – a rather easy one at that. It seems to only get easier.

September 22 – Bloomberg: “China Evergrande Group injected a fresh dose of uncertainty into financial markets on Wednesday, issuing a vaguely worded statement on a bond interest payment that left analysts grasping for details. Evergrande’s onshore property unit said in an exchange filing that an interest payment due Sept. 23 on one of its yuan-denominated bonds ‘has been resolved via negotiations off the clearing house.’ While the comment helped trigger knee-jerk gains in some risky assets, Evergrande didn’t specify how much interest would be paid or when. That fueled speculation among some analysts that the developer struck a deal with local bondholders to postpone the payment without having to label the move a default.”

September 24 – Bloomberg (Chester Yung): “China’s central bank continued to pump liquidity into the financial system on Friday as policy makers sought to avoid contagion stemming from China Evergrande Group spreading to domestic markets. The People’s Bank of China has injected a net 460 billion yuan ($71bn) of short-term cash into the banking system in the past five working days, including 70 billion yuan on Friday. That’s helping ensure sufficient liquidity throughout the Evergrande crisis… The cost of borrowing overnight fell to 1.68%, the lowest level since late July, down from 2.28% last week.”

American and Chinese flags and USA dollars

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Disclosure: Doug Noland is not a financial advisor nor is he providing investment services. This blog does not provide investment advice and Doug Noland's comments are an expression of opinion ...

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