Trump said he will raise tariffs on $250 billion in Chinese goods to 30% and hike duties on another $300 billion in products to 15%.Politicsread more
Stocks dropped after Donald Trump ordered that U.S. manufacturers find alternatives to their operations in China.US Marketsread more
Federal Reserve Vice Chair Richard Clarida said Friday that the global economy has deteriorated in the past month.Marketsread more
The latest escalation in the trade war ups the odds the economy will fall into recession and that the Fed will aggressively cut rates.Market Insiderread more
Here are the products that stand to be the most affected by China's new tariffs on $75 billion worth of U.S. goods.Marketsread more
"We don't need China and, frankly, would be far better off without them," Trump tweeted.Politicsread more
"My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?" Trump wrote amid a series of tweets that rattled markets Friday.Politicsread more
"I would love this to be clarified. We come to a deal on trade, boy, this market is up 10 to 15%, but without it's going to be worrisome," Jeremy Siegel says.Marketsread more
The final week of August could be highly volatile as markets fret over the economy and the latest developments in trade wars.Market Insiderread more
Tesla solar energy systems reportedly ignited at an Amazon warehouse in Redlands, California last June, and the Seattle e-commerce titan confirmed that it has no further plans...Technologyread more
The death comes as federal and state health officials investigate a slew of lung illnesses in connection to e-cigarette use.Health and Scienceread more
Beijing's efforts to restructure local government debt look set to boost the size of China's nascent municipal bond market by up to twenty times, analysts say.
China is in the midst of unraveling the web of local government debt in the shadow banking system and, in the process, kick start its long held plan to promote a market driven municipal bond market.
Once the central government finalizes a proposed debt swap with commercial banks, China's municipal bond market could grow by nearly twenty times, to up to 2 trillion yuan ($322 billion) this year, according to Societe Generale rates strategist Frances Cheung.
Last year, Beijing started taking tentative steps to move municipal debt out of the shadows. A handful of cities, including Beijing, were authorized to issue 100 billion yuan of bonds in 2014, after a central government audit recognized local government debts issued through financing vehicles to banks of 18 trillion yuan ($2.9 trillion), more than a quarter of China's 2014 GDP of 63 trillion yuan.
To make sure the commercial banks have enough liquidity to handle the latest and bigger restructuring of around one trillion yuan, Beijing has cut the reserve requirement ratio (RRR) twice over the past few months, most recently on April 19, by a full percentage point to 18.5 percent.
"We see the recent reserve ratio rate (RRR) cut by the People's Bank of China [as] very much related to this issue," Aberdeen Asset Management's Head of Asian Fixed Income Adam McCabe told CNBC by email. The commercial banks will be the main buyers of the local government debt, and a reduction of the RRR would ease the liquidity burden, he said.
And, with local investors swimming in excess liquidity, China's municipal bond market could finally be ready for take-off.
"The municipal bond market should grow by 20 to 30 percent every year for the next few years," ANZ Greater China chief economist Li-Gang Liu told CNBC by phone.
To be sure, it's still not clear if banks can be persuaded to trade in loans paying interest of 7 percent for municipal bonds, with maturities of between two to five years, that are only likely to pay around 0.50 percent over bonds issued by the central government. Five-year Chinese government bonds are currently quoted at around 3.287 percent, compared to 1.548 percent for U.S. Treasuries and 0.067 percent for German bunds of the same maturity.
Still, flush with the PBOC's 1.2 trillion yuan liquidity injection, analysts expect the commercial banks to come around, and pour that extra cash into the new municipal bonds when issuance starts in earnest from June.
"The market needs to pause and digest, but the government is committed to dealing with the [local government debt] issue," Moody's senior analyst Nicholas Zhu said by phone.
Better disclosure needed
Foreign investors will still have some lingering concerns, particularly over local government finances, however.
Municipalities would need to improve the disclosure of their accounts, and the central government will probably need to impose debt limits as well as authorize the big three U.S. agencies to start rating the municipalities, said ANZ's Li-Gang.
Still, he sees no shortage of potential investors, including foreign ones.
In a world of low interest rates, "the yields are just too attractive," Li-Gang said.