Rabo: The Market Might Soon Start Worrying How Contagious “Sickouts” Might Prove To Be
By Michael Every of Rabobank
US markets were closed yesterday. However, there was no lack of action out East. Indeed, Monday was a real zāo gāo (too bad; how terrible; what bad luck) day in China: the kind of trading that even worries the many Banana Splits among market analysts (“Tra la la; Tra la la la”).
Evergrande contagion continued to spread. If you cut off funding to a highly leveraged sector, and it sees sales collapse too, bad things tend to happen to liquidity. Specifically, Evergrande once again did not pay interest on US dollar debt due on Monday, while two more small Chinese developers pushed their debt repayment date and offered only 5% of the principal required. Generally, junk bond yields surged. The FTSE Chinese High-Yield index has now tumbled to 275.4, the lowest…
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