Last week it seemed that CIT (CIT) was on the verge of entering bankruptcy protection after the Obama Administration drew a line in the sand with respect to the federal bailout for troubled financial firms. CIT had previously received $2.3 billion from the Troubled Asset Relief Program (TARP) last fall, and the government could have lost its investment if the company did seek bankruptcy protection. CIT is one of the nation's largest lenders to small and mid-size businesses. However, following the weekend-long negotiations with six key bondholders (including a PIMCO bond manager), it appears there is agreement upon temporary financing terms. CIT would receive $3.0 billion at an initial 10.5% interest. As a result, CIT could be able launch a debt exchange offer to free itself from upcoming debt maturities. This financing deal could also give CIT time to complete a plan to transfer loans ...

China has once again snatched the leadoff spot in our daily lineup. And once again, they’ve knocked the cover off the ball.

The Chinese economy expanded at a dizzying 7.9% in the second quarter, their government announced yesterday. That far exceeds analyst expectations and China’s still-impressive 6.1% first-quarter growth. Conveniently, the second-quarter jump — plus revised GDP growth expectations of 8% in the third quarter and 9% in the fourth — puts China perfectly on track for the 8% annual growth they promised earlier this year.

Looking through the fine print of today’s data… oy, these are some la-la land numbers:

New lending in the first half soared 201% compared to the year before First-half property sales up 53% per annum Chinese home prices are growing at a 10% annualized pace First-half auto sales up 17% per annum Retail sales up 15% in the first half Inflation down 1.1% from a year ago.

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Risk aversion returned to markets on Thursday, supporting the U.S. dollar and government bonds, after mixed economic data, while concern about the possible failure of a small U.S. lender sparked caution following the week’s robust gains in stocks.

Oil hovered around $61 a barrel as worry about the strength of global fuel demand was offset by news of strong economic growth in China.

The U.S. dollar initially fell to a six-week low against major currencies after JPMorgan’s reported record investment banking and trading results, providing further evidence of recovery in the financial system, but weak U.S. manufacturing data and concern about the impact of the possible failure of U.S. lender CIT re-introduced a bid for safer-assets.

CIT’s talks about aid with the U.S. Treasury ended Wednesday night, leaving the lender to its own devices, and endangering the future of some of the one million customers of the lender to small businesses. U.S. Treasury debt

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