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China
Interbank Market Freezes As Overnight Repo Explodes To 25% - (www.zerohedge.com)
It
seems liquidity (or counterparty mistrust) is beginning to reach extreme levels
in China as the nation's banking
system is now quoting overnight repo transactions at 25%. The explosion
in funding costs echoes the collapse in trust (and surge in TED spread) among
US banks in the run-up to the Lehman bankruptcy. MSCI Asia-Pac stocks are down
over 3% with China's Shanghai Composite -2.5% at seven-month lows.
- China’s 1-day
Repo Rate Climbs to Highest Since at Least 2006
- MNI - CHINA
OVERNIGHT REPO FIXING AT RECORD HIGH
China's bond
market is also collapsing: Yield on
3.1% govt bonds due January 2016 jumps 39 bps to 3.749%, biggest rise
since notes were issued in January
Convicted
mortgage kingpin fails to report for prison - (www.detroitnews.com) Ronnie Duke, the one-time mortgage kingpin
sentenced to 13 years in prison for his role in one of the country's largest
fraud scams, failed this week to surrender to federal prison officials. Duke,
46, was ordered in April to begin his sentence by June 3. A federal magistrate
signed a warrant for his arrest on Thursday, court records show. Duke was
convicted for his role in a scheme that used fake documents to secure hundreds
of loans on homes throughout Metro Detroit from 2003 to 2007, triggering nearly
$95 million in losses as it bankrolled a lavish lifestyle for Duke and his
co-conspirators. Harold Gurewitz, Duke's attorney, declined comment. However,
he said he has withdrawn his appeal of Duke's sentence, filed with the U.S. 6th
Circuit Court of Appeals, on Thursday because he had been unable to talk with
Duke. U.S. District Judge Julian Abele Cook allowed Duke to surrender Monday to
the Bureau of Prisons officials at a West Virginia correctional facility. As of
Thursday he had not arrived.
Detroit retirees angry, anxious over EM's pension proposals - (www.detroitnews.com) Gerald Kent is insulted. William Schultheis is upset. Roger Doppelberger is indignant. And along with 20,000 other city of Detroit retirees, they’re worried. When Detroit’s emergency manager meets with unions and pension boards today, he’ll discuss how the city can cut its costs for retiree health care. But retired city workers fear that the budget ax will bite into their pensions, too. Take Kent, who worked in the city’s Building and Safety Engineering Department as an inspector from 1997 until his retirement in December 2011. Now living in Southfield, Kent says that after generating nearly $30 million in fees and fines through his work, his pension is about 38 percent of his final salary. “That pays for not only me, but about five others, benefits and pension,” Kent wrote in an email to The News. “I kept my promise to serve the city of my birth, to uphold the laws and codes honestly. To ask me to accept a cut in my pension is an insult to the years of good service I provided.”
Detroit retirees angry, anxious over EM's pension proposals - (www.detroitnews.com) Gerald Kent is insulted. William Schultheis is upset. Roger Doppelberger is indignant. And along with 20,000 other city of Detroit retirees, they’re worried. When Detroit’s emergency manager meets with unions and pension boards today, he’ll discuss how the city can cut its costs for retiree health care. But retired city workers fear that the budget ax will bite into their pensions, too. Take Kent, who worked in the city’s Building and Safety Engineering Department as an inspector from 1997 until his retirement in December 2011. Now living in Southfield, Kent says that after generating nearly $30 million in fees and fines through his work, his pension is about 38 percent of his final salary. “That pays for not only me, but about five others, benefits and pension,” Kent wrote in an email to The News. “I kept my promise to serve the city of my birth, to uphold the laws and codes honestly. To ask me to accept a cut in my pension is an insult to the years of good service I provided.”
Echoes
of Mao in China cash crunch - (www.ft.com) As China’s
credit crunch takes a turn for the worse, the question of why the central bank
has permitted market conditions to deteriorate so suddenly and so sharply looms
ever larger. Short-term money market rates surged to more than 10 per cent on
Thursday, a record high and nearly triple their level just two weeks ago, after the central bank refused to inject extra funds into
the strained financial system. Analysts have mostly viewed the squeeze in
economic terms, as a warning to lenders that they must rein in dangerously fast
credit growth. But in the midst of the extreme market stress, a statement
issued late Wednesday by the central bank raised the possibility that politics
are also playing an important role. Bankers had been calling for the central
bank to ease the pressure and a few investors had even predicted that it might
cut interest rates. Instead, the People’s
Bank of China ordered a thorough implementation of the new
“mass line education” campaign launched this week by President Xi Jinping – a
campaign that in its propaganda-style and potential scope carries echoes of the
Mao era.
Emerging
Markets Crack as $3.9 Trillion Funds Unwind: Currencies - (www.bloomberg.com) Investors are pulling money from emerging
markets at the fastest pace in two years as slowing economic
growth and the prospect of less global stimulus sink stocks, bonds and
currencies from India to Brazil. More than $19 billion
left funds investing in developing-nation assets in the three weeks to June 12,
the most since 2011, according to EPFR Global. Foreign investors dumped an
unprecedented $5.6 billion of Brazilian stocks and $3.2 billion of Indian bonds this month, exchange data
show. JPMorgan Chase & Co.’s emerging-currency index is down 1.4 percent
this quarter, while the rupee and Turkish lira hit record lows and the real
reached its weakest level since 2009. “These are pre-quake tremors: something
big is coming,” Stephen Jen, the co-founder of hedge fund SLJ Macro Partners
LLP, said in a phone interview from London on
June 12. “There’s tremendous deceleration in emerging markets. You may see
crisis-like price actions without having a crisis.”
Fears
rise over how Portugal and Ireland exit bailout schemes - (www.ft.com) Less
than a year before European leaders hope to chalk up success for their handling
of the sovereign debt crises in Ireland and Portugal, rising bond yields and
long-term interest rates are causing concern over how the two countries will
exit their bailout programmes. Amid expectations that central banks in the US,
Japan and elsewhere will tighten monetary policy, yields on
Portugal’s benchmark 10-year bonds surged to 6.6 per cent last week from a low
of 5.2 per cent in late May. Ireland’s 10-year yields also moved higher, rising
to more than 4 per cent from a low of 3.5 per cent last month.
“Lisbon and Dublin’s return
to the market could be affected if interest rates continue to rise as markets
make adjustments between yields and the real returns countries can offer,” said
Filipe Silva, head of public debt management at Portugal’s Banco Carregosa.
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