The forced deleveraging of China's WMP-driven excess was not helped overnight by disappointing trade data as both import and export growth slumped.

April Imports grew at just 11.9% YoY (in USD terms), dramatically less than the 18.0% expectations and well down from March's 20.3% growth.

April Exports grew at 8.0% YoY (in USD terms), less than half the growth of March (16.4% YoY) and well below the 11.3% expectations.

Bad news also hit the energy space after Saudi officials desperately triued to talk up OPEC production cut deal extensions, China's trade data showed a collapse in oil demand in April (down almost 12%)...

And the result was clear...

As Bloomberg details, April trade data add to the impression of a deceleration in China's economy heading toward 2H. Export and import growth slowed, and missed expectations, despite a lower base for comparison. Trade data are volatile, but the latest numbers are consistent with signs of a slowdown from April business surveys. If the peak for 2017 growth is already in the past, China’s space for progress on a challenging deleveraging agenda will be limited. Diminished scope for higher interest rates will also add pressure for yuan weakness.

This piled on the pressure across the entire China capital markets space with commodities (4 month lows), stocks (7 month lows), and bonds (22 month high yields) all tumbling further...

The soaring cost of debt has created yet another vicious circle as China bond issuance has collapsed. In April, the number of aborted issues rose to 154, up from 94 in March, 32 in February and 31 in January.

These signs of mounting stress in China’s $9.3tn bond market come less than a month after the country’s banking regulator, Guo Shuqing, was quoted as supporting a campaign to sort out chaotic practices, and threatening to resign if the banking system became “a complete mess”.

As The FT concludes, April’s increase in cancelled bond issues continues a trend of collapsing bond issuance volumes in the first four months of the year:

“The collapse in domestic bond issuance is a clear consequence of efforts to rein in shadow banking generally and wealth management products specifically,” said Gene Frieda, global strategist for Pimco, the US investment management firm.

“This adds to an already sizeable credit tightening impulse baked into the cake for the second half of this year.”

“The question now is not if China’s economy will slow, but rather how fast,” Mr Frieda added.

As we noted previously, one wonders how long implied vol for the Yuan can decline (and spot remain stable)...

And we know what happens after that.