CRE Bailout Coming

NVDIA Goes Off

It's great to have a positive distraction at the moment, and boy did we have one. Nvidia adds USD 250BLN to their market cap in one day. That's, like, a whole Coca-Cola.

FED - Here Comes The CRE Bailout

8.6% of CRE loans bundled into CLOs were distressed by 1 measure in Jan, huge 480% surge over prior year’s proportion after borrowing costs surged, according to report by analytics firm CRED iQ

CRE CLO Distress Rates Surge over 440% in 12 Months [CRED iQ]

15+ years on and we still haven't learnt anything. Bundling up bad loans with good loans caused the Great Financial Crisis but we're still doing it. No doubt the ratings agencies are turning a blind eye again.

Triple Net Investor [X] is a good read if you want to follow the action and it's coming thick and fast in the US.

The FOMC Minutes released this week re-iterated waiting longer for interest rate cuts but the context with CRE were

SCREAMING CRE BAILOUT !

“CRE prices continued to decline, especially in the multifamily & office sectors & low levels of transactions in office sector likely indicated that prices had not yet fully reflected sector’s weaker fundamentals.”

Thanks to Danielle DiMartino Booth for staying focused on how this is unfolding.

It's the banking system that is going to get caned of course and in Germany the contagion is spreading

Aareal Bank in Germany bond hammered [X]

German Bank debt @20c on the dollar [X]

And the FT more soberly:

Bad property debt exceeds reserves at largest US banks [FT]

No wonder we had almost all of the FOMC speaking this week

• FOMC MEMBER BOSTIC
• FOMC MEMBER BOWMAN
• FED VICE CHAIR JEFFERSON
• FOMC MEMBER HARKER
• FOMC MEMBER COOK
• FOMC MEMBER KASHKARI
• FOMC MEMBER WALLER (THURS. 7:35PM)

Meanwhile over at the Treasury

Ugly Treasury Auction of? 20 year bonds doesn't bode well for the onslaught of issuance in the pipeline.

https://x.com/jameslavish/status/1760414787274731622?s=20 [X]

https://x.com/BobEUnlimited/status/1760698713805373732?s=20 [X]

China's Back?

Cutting loan rates, along with the huge number of supportive efforts, has finally stabilised the Chinese stock markets?

US warns China against dumping goods on global markets [FT]

Foreign Direct Investment Into China Slumps to Worst in 30 Years [Bloomberg]

China Tightens Grip on Stocks With Net Sale Ban at Open, Close [Bloomberg]

HSBC shares suffer biggest one-day drop in nearly four years [The Guardian]

Note that HSBC CRE sensitivity. This bank is too big to fail.?

In The Background

The Bank of Canada is likely to wrap up its quantitative tightening program as early as April, sooner than policymakers had previously indicated, according to RBC Capital Markets strategists.

France tightens budget as economic growth slows [FT]

Germany likely in recession, Bundesbank says [Reuters]

German economy to keep shrinking, Bundesbank warns [FT]

ECB Posts Its First Loss Since 2004 After Barrage of Rate Hikes

The German economy and particularly the manufacturing sector has resumed it's decline.?

German companies flock to US with record pledges of capital investment [FT]

Japanese trade balance monthly changes are nuts.?

Australia

RBA Minutes from 5th & 6th Feb 2024 [RBA]

CEO of Australia’s Biggest Grocery Chain Quits in Surprise Move [Bloomberg]

Private Credit Is Next Big Wager for Australia Pension Funds [Bloomberg]

More evidence of strong wages growth

This Week's Important Economic Indicators [London time]

Key Economic Releases: https://suberia.capital/economic-indicators-by-country

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