3 ms·
Um, look at the bond prices dude. About 20%-30% of the sector is now pricing in default. Yes the local banks matter, but as we just saw, international dollar
by thedudeabides5 5y ago
Um, look at the bond prices dude.
About 20%-30% of the sector is now pricing in default.
Yes the local banks matter, but as we just saw, international dollar bonds can and will default these cos
- JumpCrisscross 5y ago> 20%-30% of the sector is now pricing in default This is tame compared to contagion in market economies. It’s limited to a sector, and it’s limited to their dollar bonds. The banks are unscathed. There is no systemic credit crunch, nor any signs such a thing is imminent.
- chii 5y agoThe most important aspect is that there's probably much fewer derivative speculation from the west on chinese dollar denominated bonds (compared to the GFC). So if those bonds fails, they won't pull down other sectors or cause cross-party defaults - at least not directly. The potential for a recession in china causing recession elsewhere is non-zero though.
- thedudeabides5 5y agoNo, the most important is if real losses flow through the local banking system, and that causes a liquidity run on those banks. Other than that, yes the pain can in principle be contained to the dollar bond market, but even that price signal is now enough to let people start doing the (pretty ugly) math on if we're talking $100bn or $10tr of losses. If anyone sees estimates, would love to take a look!