In The News Today

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Jim Sinclair’s Commentary

Bloomberg decides to become president. Index all of a sudden turns red.

This Red Alert Is Now Flashing On The Bond Trader’s Radar Screen
November 8, 2019

A bond-market warning light that glowed green for years is suddenly flashing red. The bad news for bondholders is that the last time this happened, it was accompanied by the biggest sell-off since the aftermath of the global financial crisis.

That indicator is the term premium, which, for both Treasuries and German bunds, has snapped back from last quarter’s record lows. The U.S. gauge is now on track for the biggest three-month increase since late 2016.

After a stellar rally through August, global bonds have pulled back in recent weeks as thawing trade tensions lightened the global economic gloom, sapping demand for the safety of sovereign debt. Rebounding term premiums now signal the sell-off has further to run — the measure of extra compensation for holding longer-term debt versus simply rolling over a short-tenor security for years is in an uptrend that investors and strategists say has only just begun.

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Jim Sinclair’s Commentary

The New York Fed added $62.542 billion to financial markets on Wednesday as part of the central bank’s ongoing efforts to ensure that the financial system has enough liquidity and that short-term borrowing rates remain well-behaved.

It would be nice to have a full description of the real why and when/if this will end!

Fed Adds $62.542 Billion To Markets Wednesday
November 6, 2019

The New York Fed added $62.542 billion to financial markets Wednesday.

The intervention came via overnight purchase agreements in which eligible banks submitted $55.042 billion in Treasurys and $7.5 billion in mortgage-backed bonds to the central bank.

Fed repo interventions take in Treasury and mortgage securities from eligible banks in what is effectively a short-term loan of central-bank cash, collateralized by the bonds. The Fed’s injections are aimed at ensuring that the financial system has enough liquidity and that short-term borrowing rates remain well-behaved.

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Jim Sinclair’s Commentary

The U.S. collected a record $7 billion in import tariffs in September as new duties kicked in on apparel, tools, electronics and other consumer goods from China.

Market heralds supposed tariff progress.

U.S. Collected a Record $7 Billion in Tariffs in September
November 6, 2019

WASHINGTON—The U.S. collected a record $7 billion in import tariffs in September, fresh figures show, as new duties kicked in on apparel, tools, electronics and other consumer goods from China.

Tariff revenue jumped 9% from August and was up more than 59% from a year earlier. The revenue is a bounty for the U.S. Treasury, but is an increasing burden on the American businesses that import Chinese products—and their customers.

The new figures are based on an analysis of official Commerce Department data compiled by Trade Partnership, an economic consulting firm. The data was released by Tariffs Hurt the Heartland, a coaliti

The sharp rise was driven by a new 15% levy on consumer goods that went into effect Sept. 1. Imports of these items were valued at $111 billion last year, according to an analysis by The Wall Street Journal.

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Jim Sinclair’s Commentary

China, after years of pumping out financial support to keep companies afloat and workers happy, has embarked on a debt reckoning—rapidly building a bankruptcy system to take on a significant pickup in corporate defaults.

This approach beats TARP and 10 other acronyms to cover government support of US corporations in 2009.

China Embraces Bankruptcy, U.S.-Style, to Cushion a Slowing Economy
November 6, 2019

XI’AN, China—In the trenches of China’s debt-addled economy, the government has made a startling decision: Let companies fail.

That has left creditors angry, debtors fighting to save their businesses and judges on a mission to promote the benefits of bankruptcy.

After years of pumping out financial support to keep the economy humming and workers happy, China has embarked on a debt reckoning. Beijing is building a bankruptcy system to take on a significant pickup in corporate defaults.

The country now has more than 90 U.S.-style specialized bankruptcy courts to help sort through a morass of corporate debt that, until recently, would have been swallowed by state banks and other creditors.

It is a sign that Beijing is worried about the number of failing companies and trying to find a fix. The system is helping, many lawyers, foreign investors and lenders say, as it takes some pressure off local governments that lack the resources for so many bailouts.

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America’s Housing Crunch Is So Bad It May Hurt City Bond Ratings
November 6, 2019

Not only is the shortage of affordable housing and the number of homeless on America’s streets a social and public policy crisis, it’s increasingly becoming a risk for municipal-bond buyers as residents of high-cost cities struggle to make ends meet.

Home prices are up 33% nationwide over the past five years and the homeless population increased in Los Angeles, New York City and the Seattle metro area between 2014 and 2018, according to a report from Moody’s Investors Service. Failure to deal with these changes puts local governments’s bond ratings at risk as residents move to cheaper jurisdictions, spend less and use more social services.

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