Credit Bubble Bulletin

Credit Bubble Bulletin2018-10-30T12:00:02-06:00

Presented by Doug Noland

Daily Commentary

Wednesday, June 19, 2019

[Reuters] Central banks’ dovish cooing keeps world stocks lulled near two-week highs

[Reuters] Oil inches down as inventory data counters trade deal hopes

[AP] Fed could signal a policy shift toward future rate cuts

[Reuters] Trump pressures Fed’s Powell: ‘Let’s see what he does’

[Reuters] China says history shows positive outcome from U.S. talks possible

[CNBC] Weekly mortgage applications fall as rates rise, volume remains much higher than last year

[Reuters] Japan exports slide for 6th month as trade troubles knock demand, weaken outlook

[MarketWatch] Value of debt with negative yields nears $12 trillion

[Reuters] ECB’s Weidmann appears to drop opposition to OMT amid race to succeed Draghi

[AP] Draghi’s “whatever it takes” a tough act to follow

[Reuters] China says some forces seek to undermine stability of Hong Kong

[Bloomberg] China’s Lehman Moment Is Drawing Closer

[Bloomberg] Trump Moves From Trade War Toward Currency War

[Bloomberg] Canadian Inflation Surges As Core Rate Hits Highest Since 2012

[Bloomberg] India’s Exotic Funds Are a $40 Billion Time-Bomb for Investors

[NYT] Fed Faces Tricky Choice Amid Looming Risks and Trump Pressure

[NYT] Trump Accuses Europe of Bolstering Its Economy at America’s Expense

[WSJ] Fed, Facing Pressure on Rate Cut, to Decide on Next Move

[WSJ] Odebrecht Bankruptcy to Hurt Brazilian State-Owned Banks

[FT] US mortgage market should brace for turmoil, says QE architect

[FT] Flood of debt instruments backed by property loans hits market

[FT] It could be time for central banks to ditch 2% inflation target

[FT] How Hong Kong defied Xi Jinping

Weekly Commentary

June 14, 2019: Q1 2019 Z.1 “Flow of Funds”

Total Non-Financial Debt (NFD) expanded (nominal) $721 billion (strongest growth since Q2 ’18) during the quarter to a record $52.579 TN. NFD expanded $2.504 TN, or 5.0%, year-on-year. For perspective, annual NFD growth averaged $1.602 TN over the decade 2008-2017. NFD expanded $2.432 TN in 2006 and $2.478 TN in 2007. NFD has now expanded $17.514 TN, or 50%, since the end of 2008.

Financial sector debt expanded $127 billion during the quarter ($368bn y-o-y) to $16.444 TN, and Foreign U.S. borrowings increased $130 billion ($88bn y-o-y) to $4.051 TN. Total (NFD, Financial and Foreign) System debt expanded $978 billion during the quarter to a record $73.073 TN. Going all the way back to Q4 2017, Q1’s system-wide Credit expansion was second only to Q1 ‘18’s $1.002 TN.

Total Credit grew at a 5.6% rate during the quarter, up from Q4’s 2.72% to the strongest pace since Q1 2018’s 6.51%. Federal government borrowings jumped to an 8.57% rate, up from Q4’s 2.50% to the strongest pace since Q1 ‘18’s 13.38%. Total Corporate borrowings accelerated to a 6.62% pace, up from Q4’s 3.88% to the strongest rate since Q2 2017. Non-Financial Corporate borrowings jumped to a 7.58% pace (from Q4’s 3.35%), the briskest rate since Q1 2016. Total Household Borrowings slowed to a 2.33% pace (from Q4’s 2.82%), with Household Mortgages and Consumer Credit expanding 2.43% and 4.34%. The Domestic Financial Sector increased borrowings at a 3.28% pace, up from Q4’s 2.71%.

At seasonally-adjusted and annualized rates (SAAR), total system Credit expanded $2.884 TN during Q1, double Q1 to the strongest pace since Q1 2018’s SAAR $3.207 TN. Federal borrowings surged SAAR $1.531 TN (up from Q4’s SAAR $444bn). Total Corporate borrowings expanded SAAR $1.014 TN, the strongest since Q1 2016’s SAAR $1.150 TN. Household borrowings grew SAAR $363 billion (mortgage SAAR $252bn, Consumer Credit SAAR $174bn), the weakest pace since Q1 2016’s SAAR $334 billion. Financial Sector debt expanded SAAR $535 billion, the strongest rate since Q3 2016’s SAAR $557 billion. (more…)

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