flash on Nostr: ⚡️🚨 FINANCIAL CRISIS: China is in an untenable situation China's bond markets ...
⚡️🚨 FINANCIAL CRISIS: China is in an untenable situation
China's bond markets are sending out a worrying warning signal, with 10-year yields down to 1.65%.
This level is comparable to that seen in the United States during the 2008-2009 crisis.
The cause of this situation is the collapse of the property market, forcing local governments to massively devalue prices in order to absorb the 81 million unsold or abandoned homes.
This devaluation is putting banks in dire straits, as the value of their loan collateral evaporates and their interest margins shrink dangerously.
The Bank of Shanghai now operates with a margin of just 0.9%, a critical level.
Faced with the collapse of the property and stock markets, Chinese savers are taking refuge in bank deposits, forcing financial institutions to turn to government bonds, driving down their yields.
The government finds itself trapped: unable to relax capital controls for fear of a massive flight, while corporate profits continue to fall.
Its only option seems to be to increase public debt issuance, already at record levels.
The question is no longer whether the system will hold, but when and to what extent.
China's bond markets are sending out a worrying warning signal, with 10-year yields down to 1.65%.
This level is comparable to that seen in the United States during the 2008-2009 crisis.
The cause of this situation is the collapse of the property market, forcing local governments to massively devalue prices in order to absorb the 81 million unsold or abandoned homes.
This devaluation is putting banks in dire straits, as the value of their loan collateral evaporates and their interest margins shrink dangerously.
The Bank of Shanghai now operates with a margin of just 0.9%, a critical level.
Faced with the collapse of the property and stock markets, Chinese savers are taking refuge in bank deposits, forcing financial institutions to turn to government bonds, driving down their yields.
The government finds itself trapped: unable to relax capital controls for fear of a massive flight, while corporate profits continue to fall.
Its only option seems to be to increase public debt issuance, already at record levels.
The question is no longer whether the system will hold, but when and to what extent.