Biden and Xi are set to meet virtually next week. Tesla sees a $199 billion wipeout. China struggles with symptom-free Covid cases. Here’s what you need to know today.
China’s cut-throat politics is entering a dangerous period as top Communist Party leaders meet this week, kicking off the closest thing President Xi Jinping has to a campaign season, with an unprecedented third term in his sights. As officials jockey for promotion, they risk not only losing power but also getting locked up. Meanwhile, Xi and Joe Biden are set to hold their long-awaited virtual summit next week, sources say. One of the major points of contention is likely to be Taiwan, which is once again making headlines with the news that a group of U.S. lawmakers visited, arriving on a military plane. One Chinese newspaper branded the delegation “sneaky as rats.”
Tesla lost about $199 billion in value during its biggest back-to-back selloff since September 2020 amid a host of negative news. The selloff deepened on a report that Michael
Burry tweeted that Elon Musk may want to dump some shares to cover his personal debts. It fell 12% in its worst two-day performance since March. Separately, the CEO's brother and Tesla board member Kimbal Musk sold 88,500 shares for about $109 million a day before Elon launched his now infamous Twitter poll. That represents about 15% of Kimbal's equity stake, excluding options.Asian stocks are set for a mixed start after U.S. shares snapped their longest winning streak since 2017. Treasuries rallied, with some traders citing an unwinding of bearish bond bets. Futures for Japan were steady, those for Hong Kong fell and Australia’s rose. Meanwhile, China Evergrande is facing its biggest payment test since signs of a liquidity crisis emerged at the firm five months ago. Investors are waiting to see if the embattled developer makes coupon payments totaling $148.1 million for three dollar bonds before the end of 30-day grace periods Wednesday.
The number of asymptomatic Covid cases in China is challenging its efforts to keep the virus out of the country. On Tuesday it reported more infections in people who exhibited no symptoms than in those who were actively suffering from the virus. Meanwhile, in the U.S., White House medical advisor Anthony Fauci said more vaccines and boosters shots were needed to keep a holiday season surge at bay, while Pfizer asked the U.S. to authorize boosters for all adults. And a new study shows Covid erased 28 million years of cumulative life expectancy from 31 countries last year.
Every day in the early afternoon, money-market traders are glued to the Federal Reserve Bank of New York’s website to see the results of the overnight reverse-repurchase agreement facility. While professional traders check the central bank’s website to see how much excess liquidity the bank is sopping up, many Reddit users are interested in, well, something else. Here’s everything you need to know about the reverse repo, and why it’s become Reddit’s latest money-making obsession.
What We’ve Been Reading
What’s caught our eye over the past 24 hours:
And finally, here’s what Tracy’s interested in today
What's that saying about yield? You wait for it for ages and then a bunch of it comes along at once?
Investors are said to have mounted an almighty search for yield in the aftermath of the 2008 financial crisis and a hefty dose of financial repression courtesy of central banks. Yields on all types of credit followed the broad strokes of government bonds to reach record lows. The joke, churned out again and again and again, was that “high-yield” was misnomer. Instead, investors had to satisfy themselves with “slightly higher-yield.”
Well, I'm pleased to announce this morning that we've found the yield. The long search is over!
Take a look at dollar-denominated junk-rated Chinese bonds, where yields on a benchmark Bloomberg index have eclipsed 23% as concerns about property developers spread. If you want yield, you can get a lot of it in this space. (You can find even more of it in individual issuers. Kaisa bonds due in 2024 are now trading at a yield of a whopping 75%). Of course, if you do decide to snap up these bonds on the cheap, then you're effectively betting that worries over China's real estate sector are overdone. But then, no one ever said we'd know what to do with yield once we found it.
You can follow Tracy Alloway on Twitter at @ tracyalloway.
— With assistance by Tracy Alloway
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