Issuance of equity-linked instruments has surged. Notably, a Chinese convertible bond deal had more than $1 trillion in demand.
The Financial Times reported Chinese Bank Raises More than $7 Billion with Record Convertible Bond.
Bit of Advice
Michael Pettis at China Financial Markets has this bit of advice:
…costs by shorting volatility, it is a worrying sign. This stuff may feel like equity, but it’s always at the worst possible time that you discover that it is really debt.
— Michael Pettis (@michaelxpettis) October 30, 2019
“This stuff may feel like [cheap] equity, but it’s always at the worst possible time that you discover that it is really debt.”
I took the liberty of adding the word “cheap”.
Seems appropriate given the massive over-subscription at world record levels.
Mike “Mish” Shedlock
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The Chinese people live under capital controls with no social safety net. With central banks everywhere promising “whatever it takes” this probably appears as close to a safe investment as it gets for them. Cosmic scale CB mismanagement begets matching moral hazard, eventually. Welcome, fellow travelers.
Wasn’t one of President Reagan’s strategies to deal with the evil Russians was to cut off their supply of foreign currency, especially USD. We are doing the exact opposite with China and they are worse than the Soviets were back then.
Mish, that is 330 times… what does that make 23.000% ? crazy shit
No, 33.000%
1 trillion? It’s not just that it’s a big number, but it’s just one trade, in one market!
1T RMB
1T isn’t what it used to be. Relentless printing led to this massive over-subscription. Anybody still believes in happy ending?
Nope. No happy ending. But what worries me is that we (the taxpayers) will inevitably pay for whatever collapse will take place. And aside from that being infuriating, it will probably have a tremendous impact on society.