Daily data on China, UK borrowing plans and record bond short bets
This week's chart covers the following topics:
An innovative daily data series that’s pointing up for China’s economy
We’ve been posting charts pointing to a nascent recovery in China. Here’s another: the high-frequency YiCai Economic Activity Index.?
This indicator, which is updated daily, is an innovative amalgamation of data: it tracks traffic congestion, air pollution, a commercial housing sales index, and unemployment and bankruptcy indices based on internet searches.
This chart compares YiCai’s track record (in the lower pane) to growth rates for three conventional economic indicators in the top pane: retail sales, industrial production and fixed asset investment. (All three of these macro data figures will be released on Nov. 15.)
The YiCai index has been creeping higher lately. Will it once again prove to be a key leading indicator, as it was through the strong rebound of 2020-21 and the disappointments of 2022?
UK government borrowing in context
It’s been a year since the debacle of the Truss-Kwarteng “mini-budget” that would have seen Britain run massive deficits to fund tax cuts. By contrast, the Sunak-Hunt era has seen a quiet continuity of fiscal orthodoxy, as our chart demonstrates.
Chancellor of the Exchequer Jeremy Hunt, worried about higher borrowing costs, has fended off pressure for tax cuts. He also presided over a healthier-than-expected turn in the public finances as the UK economy defied some of the gloomier predictions of 2022 .
This double-paned visualisation tracks the UK’s public sector net borrowing (excluding public sector banks) month by month – both in absolute terms and as a percentage of gross domestic product (GDP).
The blowout borrowing of the pandemic era is highlighted in gray. Today, borrowing is roughly in line with the pre-pandemic era, at least in percentage-of-GDP terms.
This week’s King’s Speech suggested there will be more of the same. The government will “support the Bank of England to return inflation to target by taking responsible decisions on spending and borrowing,” the monarch told Parliament.
The record short Treasury bets that have regulators worried
Hedge funds are making a record bet against US Treasuries.?
This chart uses data from the Commodity Futures Trading Commission to compile net long and short positions in US government debt. There are large short positions against two-, five- and ten-year securities.
While there will be some “fundamental” positioning betting Treasuries have further to fall amid sticky inflation and “higher for longer” Fed rates, most of the short bet is attributed to the “basis trade” – an arbitrage of price differences between cash bonds and futures. Hedge funds borrow a lot of money for such trades – hence the “leveraged funds” referred to in the chart title.
The size of the bet reportedly has regulators worried about financial stability risks – especially since yields fell in the first week of November (which some observers say was short-covering of that very same bet, as well as the result of optimism about a “soft landing” for the economy). Notably, the well-known hedge-fund manager Bill Ackman recently exited his own short bet against 30-year Treasuries , saying the trade (and the world) had become too risky.
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Watch our webinar on China
Does China’s recent weakness bely a broken economic model, or will accommodative policy restart Asia’s growth engine? Our webinar features expert insights from Yan Wang, chief China and emerging market strategist at Alpine Macro, and Arthur Kroeber, founder and head of research at Gavekal.
The Bank of Japan’s “tweak and hold”
Macrobond’s Harry Ishihara is back to explain whether the latest policy shift means Japan’s negative interest rate policy will come to an end next year.
What governs the value of China’s currency??
Siwat Nakmai uses four Macrobond visualisations to examine the factors that push and pull on the renminbi, including US-China rate differentials and the current-account surplus.?
Check out our latest data additions.?
Can’t get enough charts? Usama Karatella and Meghna Shah take you through the newest time series added to the Macrobond universe. They highlight data showing:?
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