Friday November 20

Friday November 20

over 3 years ago3 mins

Mentioned in story

Turns out China is cast in the same mold as Europe after all: its government sold negative-yielding bonds for the first time ever on Wednesday 🇨🇳

What does this mean?

The Chinese government only issued $5 billion worth of bonds, but demand was far higher than that: investors put in over $20 billion worth of orders. That level of interest pushed the bond’s price higher and higher, which in turn pushed its yield – i.e. the return an investor earns, which moves inversely to the bond’s price – down into negative territory 📉 That’s an unusual situation: a negative bond yield effectively means the investor is paying to lend to the issuers of the bond – in this case the Chinese government. And while record low interest rates mean it’s not uncommon in Europe, it is a new experience for China.

Yields on bonds in euros due in late 2026
Source: The Wall Street Journal

Why should I care?

There’s a couple of reasons investors would want to buy Chinese debt that won’t pay them anything. For one thing, they might be obligated to hold a certain portion of bonds in their portfolio – and considering yields on China’s are still higher than those one Europe’s, Chinese bonds are the lesser of two evils 💶 And for another, the Chinese government issued this debt in euros, which it doesn’t do very often. Europe’s investors, then, might be keen to get in on a fast-growing economy that boasts a more positive outlook than either its European or US counterparts.

The Chinese government may have no problem finding money to borrow, but the country’s state-backed companies sure do: just last week a Chinese state-owned coal miner defaulted on its loans, and it wasn’t the first 🙄 Investors are starting to worry this is the start of a string of failed repayments for state-owned companies, and that the government will happily just let them go bankrupt. And since it’s China’s banks that lent them money in the first place, their stocks have started to slide too…

Banks drag Shanghai’s largest stocks lower

Keep reading for our next story...

Macy's Earnings Beat Analysts' Expectations

Macy’s image

Macy’s might’ve announced better-than-expected earnings on Thursday, but that doesn’t mean the department store chain has much to celebrate next week 🎉

What does this mean?

Shoppers have been cutting back their spending at department stores, it’s true, but Macy’s wasn’t hit quite as badly as expected: its sales at stores that have been open for more than a year “only” fell by 20% compared to the same time last year. And better yet, online sales grew by 27%.

But let’s not get ahead of ourselves: that’s half as much growth as the quarter before – at a time when everyone is shopping online 👨‍💻 That’s worried investors, especially with retail’s busiest time of the year just around the corner…

Why should I care?

Macy’s is facing tougher competition these days from the likes of Walmart and Target, both of which reported better-than-expected results earlier this week 📈 Those “big-box retailers” aren’t just roomy enough for some socially distant browsing, they have a huge variety of products too. And with those product ranges only getting wider – and trips to out-of-town mall complexes only getting less appealing – it’s easy to see why folks would want a one-stop shop for… well, shopping.

Off-price retailers and department stores off pandemic lows

L Brands – owner of Bath & Body Works and Victoria’s Secret – beat expectations in its earnings update on Thursday too. But unlike Macy’s, its sales were heading in the right direction: they climbed 14% versus the same time last year, on the back of a surge in demand for Bath & Body Works soap and sanitizers 🧼 Good luck trying to compete with Eau De 2020, Macy’s…

Macy’s gif
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