Inflation? Completed it mate

Yesterday's inflation print (that everyone knew was coming) led yields lower.

This is still in play...

Real yields fell too...

Treasury

It would be no surprise to see gold push on further.

There's nothing gold loves more than 10Y real yields close to -1%

The ECB were as dovish as always, and the September meeting is now the focus for taper talk...

As ING noted:

The 9th September meeting could be the moment at which the ECB will at least start philosophising about tapering.

However, as long as core inflation projections remain at their current low levels, tapering will rather be a rotation from one asset purchase programme to the other than a significant outright reduction of the purchases.

Mixed performance in Asia ahead of the long weekend (Dragon Boat Holiday on Monday)

“The slowdown in credit growth is happening even faster than we had been anticipating a couple of months ago,” Julian Evans-Pritchard at Capital Economics said in a note.

“While the economy has so far weathered the withdrawal in policy support very well, the usual lags mean that weaker credit growth will become a growing headwind to activity over the next few quarters.”

China Beige Book shared this great chart:

Demand for loans is still there but they're not so keen to lend...

"Because of very strong external demand the negative impact from credit deceleration should be OK in the next three to six months, mainly thanks to the strong demand from the U.S.," said Larry Hu, economist at Macquarie in Hong Kong.

"(But) once the demand from the U.S. is back to normal then I think the Chinese economy is going to feel more pain from the credit tightening."

David & I were discussing the China situation yesterday.

On the whole, markets are pretty calm about the deleveraging risks and bond defaults.

At some point though, these ever-present risks will spill over.

It could easily be the story of 2022 as the tightening effects really take hold.

“Those individual investors who participate in trading [of high-risk products] are indeed taking a gamble.

They are set to suffer losses, just like those who believe property prices will never fall. At the end, they will pay a big price,”

I wonder if it is just rhetoric to contain speculation or preparation for the 'we told you so' moment down the line.

Probably both.

BlackRock has become the first global asset manager allowed to start a wholly-owned onshore mutual fund business in China, as Beijing accelerates opening of the $3.5 trillion industry.

"China is taking significant steps in opening up its financial markets," BlackRock Chairman and Chief Executive Officer Larry Fink said in a statement.

"We look forward to sharing our global investment expertise and offering more differentiated investment solutions to Chinese investors."

In the UK, a two-week delay to full reopening is nailed on...

G7 summit over the weekend.

It will probably be more chatter about building a better world, working harder on the global minimum tax that will never happen, sending 1 billion jabs to the poorer countries, and so on.

Some of it will happen, some won't.

The main thing I'm looking for is the messaging around a strengthening alliance and getting behind the 'rules-based' international order to keep China in check.