Business

Last summer, millions of farmers, housewives, security guards and a litany of other newly minted daytraders, opened enough new stock trading accounts for evey man, woman and child in Las Angeles - in just one month.

The excitement was palpable - and before anyone knew it, the proliferasion of around a half back door margin lendings chanells pumpped an additional CNY1.5 trillion into an already frothy market. Without putting too fine a point on it, didn't work, it started to uravel and the party got concerned about social instability.

Two days ago, Credit Suisse reported something which had been rather visible in the markets: an onslaught of retail buying had entered the junk bond market in which institutions were delighted to sell to retail bagholders, in the process repricing the entire HY space if only briefly.

Overnight, fund flow tracking service EPFR confirmed this when it reported that US high yield funds recognized a $5.27bn (+2.8%) inflow for the week ended March 2nd, the largest ever in terms of $AUM and the 2nd largest on a percentage basis.

There is an odd feeling of Deja QEu this morning, when with two hours to go until the February payrolls, global stocks are modestly higher, US equity futures are likewise slightly higher on the back of a weaker dollar (or perhaps stronger Euro following a Market News report according to which the ECB may disappoint, more on that shortly), but it is gold that is breaking out, and after entering a bull market yesterday when it rallied 20% from its December lows...

With all western eyes firmly focused on US payrolls tomorrow, China is preparing for the biggest leadership gathering of the year this weekend. Offshore Yuan (USDCNH) is soaring (up over 5 handles in the last 24 hours) ahead of The National People's Congress as PBOC Deputy Governor hinted at support for the currency saying that it isn't "strictly" pegged to the new basket.

This is the biggest surge in Yuan in a month...

Chart: Bloomberg

Pushing Yuan back to 3-week highs...

Chart: Bloomberg

At the end of January, when looking at some recent liquidating energy companies selling off their assets in "stalking horse" bankruptcy auctions, we found something disturbing: total recovery rates under liquidation of oil and gas companies were paltry, ranging anywhere between 5 and 20 cents on the dollar, and averaging a little under 15 cents.