government debt growth slows significantly and so do the bond holdings by foreigners. If the peso remains stable for some time, will foreigners return?
5. The Philippine
stock market surges as the transition to the newly elected government seems to be going well.
6. This last chart shows Asian
residential property price changes since 2006 and since 2009.
Switching to China
, here are some observations.
1. The onshore-offshore renminbi spread is starting to widen again. More capital outflows?
2. Stuff from China coming into the US is getting progressively cheaper. A portion of this is steel dumping.
3. Below is a comment from Credit Suisse on the collapse of speculative activity in China's steel markets. This has been a spectacular shift in sentiment.
April service sector sentiment fell to the weakest level since 2014. This is the Economy Watchers Survey which targets individuals working at consumer-oriented firms (barbers, taxi drivers, waiters, etc.)
1. Switching to the Eurozone
, the area's monetary base hit €1.9 trillion, a new record.
2. The next chart shows European corporate debt: bonds vs. loans. The financial crisis and the Eurozone debt crisis forced bank deleveraging (halting lending) while the bond markets continued to grow. Thus, we have the divergence between the two markets.
3. Take a look at the divergence between (euro-denominated) high-yield and investment-grade issuance in 2016.
1. The broad money supply growth is approaching 7% per year, highest since 2013. What's driving this? New loan creation. It's hard to look at this and suggest that US credit conditions have tightened.
2. US mortgage rates hit the lowest level in 3 years, providing additional support for housing.
3. We had a bit of a jump in the US initial jobless claims number. Is this just noise? A poor seasonal adjustment perhaps? More on this later.
4. Here is the latest economists' survey on the next Fed hike. With a softer payrolls report last week, many economists have shifted projections from June to July and September. Perhaps another Daily Shot survey is in order.
Next, we look at some trends in the credit markets.
1. The Volcker Rule kills liquidity in US HY market, with many bonds trading "by appointment" like real estate. Banks went from being market makers to introduction brokers. Many HY desks these days have little understanding of the credits. The focus is simply to find the other side.
2. The chart below shows bonds that are downgraded from investment grade to high yield ("fallen angels") as well as those that are "promoted" from high yield to investment grade ("rising stars"). The net is also shown.
3. Lots of folks are now getting involved in US multi-family housing finance.
Turning to Food for Thought, we have 5 items this morning:
1. Opioids-related deaths in the United States.
2. According to Gallup, "Hawaii and Colorado are the only two states with the obesity rate below 20%".
3. Immigrant populations in the largest 3 states.
4. Average age of employees at US technology firms.
— Edited by Clemens Bomsdorf* Walter Kurtz is an alias
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