Archives of “bank of china” tag

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Bank of Canada holds rates at 0.25%, as expected

  
  Analysis
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Highlights of the Bank of Canada rate decision

  • Prior was 0.25% (this is the effective lower bound for Canada)
  • BOC pledges to keep rates at 0.25% until inflation target hit
  • BOC to continue $5B per week in QE; repeats buying will continue “until the recovery is well underway”
  • BOC stands ready to adjust its programs if market conditions warrant
  • Says economic decline “considerably less severe than the worst scenarios presented in the April MPR”
  • BOC sees 40% of activity recovered in Q3 but then “the Bank expects the economy’s recuperation to slow as the pandemic continues to affect confidence and consumer behaviour and as the economy works through structural challenges”
  • Central scenario in in MPR shows economy not likely to return to pre-COVID levels until 2022
  • Sees 2020 GDP down 7.8%, up 5.1% in 2021 and up 3.7% in 2022
  • Says Q2 activity estimated to have fallen about 15% below its level at the end of 2019, economy appears to have bottomed in April
  • Sees US GDP down 8.1% in 2020, up 3.4% in 2021 and up 4.3% in 2022
  • Global GDP forecast down 5.2% in 2020 and up 5.2% in 2021
  • The path for CPI in the next year largely reflects the influence of energy prices
The big news here is this line:
“The Governing Council will hold the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2 percent inflation target is sustainably achieved.”
That’s forward guidance indicating no hikes until 2% inflation is ‘substantially achieved’. That last phrase leaves them some wiggle room but this is conditional forward guidance.
Macklem will hold a briefing at 1500 GMT (11 am ET)
Forecasts in the MPR:
BOC forecasts for developed world

China’s gold reserves data shows the country bought more again in September – up for the 10th month in a row

  
Analysis, Gold / Silver
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Data from the People’s Bank of China for the month of September 2019

  • China’s gold holdings 62.64 mln ounces compared with 62.45 at the end of August
This is the 10th month in succession gold holdings have increased in China.

Here are the rate cut steps expected from the PBOC, perhaps as soon as next month

  
Analysis, Economy
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A report from Reuters outlines the likely path for People’s Bank of China interest rate cuts, maybe as early as September.

  • expected to first reduce their funding costs by lowering the rate on its medium-term lending facility (MLF)
  • That will open the door for a cut in the PBOC’s new benchmark lending rate, the loan prime rate (LPR), the next time it is set on September 20
  • he MLF forms the basis for the new LPR rate, but banks can add a premium to reflect funding costs and credit risks
  • In what was seen as a symbolic move, the revamped one-year LPR was set at 4.25% last week, down 6 basis points (bps) from 4.31% previously and 10 bps lower than the existing benchmark one-year lending rate, which will still apply to older loans
Article was overnight, so an ICYMI, link here for more.
PBOC Gov Yi Gang:
A report from Reuters outlines the likely path for People's Bank of China interest rate cuts, maybe as early as September. 

Ken Rogoff: "China Property Market Collapse Starting"

  
Analysis, Economy, Education
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Bloomberg TV conducted an interview with Ken Rogoff in Hong Kong (the same way you land in New York before you take off in London via the now defunct Concorde) in which the Harvard professor recently made famous for his words of caution that overlevering sovereigns always eventually leads to economic slow down, financial collapse, and ultimately bankruptcy, warned, when discussing China real estate, that “you’re starting to see that collapse in property and it’s going to hit the banking system.” With this coming days ahead of the massive Agri Bank of China IPO, it is interesting just how much influence the person who has been warning all along that the world is headed on an unsustainable path will finally have, now that the permabullish cackle of the MSM punditry has finally been discredited as futures are about to reenter triple digit reality. Oh yes, and score one for Jim Chanos, and all those who have long been warning about the inevitable Chinese bubble pop. Additionally, in discussing the suddenly prevalent topic of perpetual stimulus, and particularly envisioning Paul Krugman’s thesis that the world will end unless another couple of trillion are thrown into the fire of irresponsible deficit spending, Rogoff says “I couldn’t disagree more… Just to keep drinking bottles of aspirin because you are worried you are going to get a headache, or it is going to turn into a migraine, it’s too much prophylaxis.”

Full clip although none of this is news:

The Devil's Dictionary Of Financial Terms

  
  Education
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dictionary1agency, n. A criminally negligent organization that purchased and securitized mortgages; a criminally negligent organization that rated mortgages and mortgage securities. The agencies were late in downgrading the Agencies.

 

 bailout, n. A notorious regressive tax; the public underwriting of stupid bets made by overpaid morons. Can you believe their bonus pool was $16 billion a year after the bailout?

bail out, v. To selflessly save the global economy from depression and mass unemployment. If we hadn’t bailed out AIG, the unemployment rate would be 25% right now!

bubble, n. Part of the dual mandate; the monetary policy goal of the Federal Reserve and the People’s Bank of China.

carry trade, n.  A financial proposition that concludes with its adherents supine, carried out on a stretcher.

CDS, n. The simultaneous purchase of kindling, lighter fluid, matches, and fire insurance on your neighbour’s house.

conspiracy, n. The only possible explanation for certain types of irrational price action. There’s a government conspiracy to support the stock market; how else could it have rallied 70% since March? A crackpot theory held by nutjobs who can’t admit when they’re wrong. Have those conspiracy theory whackos never heard of an oversold bounce before?

credit, n. An asset universally reviled by financiers during a crisis and claimed by politicians after it.

crisis, n. A frequently occurring one-in-a-lifetime event, generally deemed impossible by those under the age of 28.

exotic, adj. Strange; unusual; rarely-seen. I didn’t think it was possible to lose $200 million in fifteen minutes, but the exotics book just did.

hedge, n. A line of closely-grouped shrubberies; a clever way of adding correlation and volatility risk to one’s portfolio.

hedge, adj. A type of investment fund generally accepted to be dedicated to the proposition of ignoring hedges of every description.

house, n. An abode; an investment. Formerly an asset, now a liability.

leverage, n. The act of turning your problem into our problem.

mine, adj. Trader-speak for a desire to make a purchase. 50 EUR/USD mine, shagger. The sole source of responsibility (and thus the rewards) for a successful trade.

option, n. A financial instrument that offers multiple ways of losing money. If being long vega doesn’t kill you , the decay will.

quantitative easing, n. An unorthodox monetary policy that targets increases in high-powered money rather than interest rates; the act of throwing sufficient sums at the financial system to ensure that the stock market starts to rally.

restraint, n. An undesirable spending habit rarely observed in public; an offense punishable by a targeted taxation regime.

risk, n. A binary analytical framework for the simpleminded; can be either off or on. A characteristic of investment that was largely forgotten in the mid-Noughties

SAFE, n. An organization dedicated to perpetuating dangerous global imbalances.

sales, n. The art of separating a customer from his money.

seat, n. The world’s most valuable furniture; a place at a market-making franchise desk at a bank. Fred made $15 million quoting prices last year, but the seat is worth $25 million!

subprime, n. An ingenious method of granting credit to the poor, thereby narrowing the wealth gap between the classes. Dick Fuld lost $650 million after Lehman’s subprime bets went sour.

volatile, adj. The temperament of your average trader on a bad day; the likely future state of financial markets after long periods of low interest rates.

Warren Buffett, n. Ebenezer Scrooge with better PR.

yacht, n. A monetary black hole; an aquatic trophy rarely seen in close proximity to banking customers.

yours, adj. Trader-speak for a desire to make a sale. 500 e-minis, yours!! Whose responsibility the average bank, insurance company, or housing agency thinks it is to pay for the financial crisis.

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