The muddy waters of this particular creek have been known to drive good men mad…
From the FT:
The seven-day bond repurchase rate, a key gauge of short-term liquidity in China, opened at 5 per cent, a four-month high and up 150 basis points from the end of last week.
But we also get this: Read more
We looked earlier on Thursday at whether the PBoC and other Chinese authorities have engineered the recent squeeze in China’s interbank markets (answer: yes) and why they might be choosing this moment to do so (answer: somewhat more complicated).
Chinese interbank rates according to Shibor are incredibly high — and yet, apart from the report of a special ‘targeted liquidity operation’ for the benefit of one, unnamed bank, the central bank appears to be resisting pleas to ease up on liquidity provision.
So, what gives? Read more
The Shibor spike continues, this time with the Wall Street Journal:
The Chinese interbank funding market has seen rates soar since early this month amid slowing foreign-capital inflows and banks’ needs to fulfill investor obligations, among other factors. The squeeze is pushing up banks’ funding costs and could impede a key source of funds for growth even as the economy slows.
Originally, there were suggestions that the increase in China’s interbank interest rates was down to the Dragon Boat Festival holiday season and a resultant search for cash. But rates have stayed elevated as rumoured defaults and auction failures got everyone nervous and liquidity pressures mounted as foreign-capital inflows slowed and those dang wealth-management products demanded feeding. Read more
Wonder why everyone is so scared about a possible Chinese slowdown? Here’s a stat for you: China is now forecast to contribute 28 per cent and 30 per cent of global growth in 2011 and 2012, respectively.
That’s an updated prediction from a concerned Citigroup note entitled “Is China all that’s left?”, and takes into account recent downward revisions to growth in the US and Europe. It’s an awful lot of weight to carry for a country that is showing several signs of homegrown stress. Read more
Shibor, shibor everywhere and not a drop of cash to spare.
Bank of America Merrill Lynch rate strategist Bin Gao has a short note out on Tuesday entitled “A possible funding crisis in China?” Read more