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20 Jun 2013
China's overnight repo surges to 25%
FXstreet.com (Barcelona) - The lack in liquidity within China's banking system is reaching extreme levels, with the overnight repo transactions surging as high as 25%, while China weighed-average overnight repo rate also hit a decade high at 13.1%.
Zero Hedge notes: "The explosion in funding costs echoes the collapse in trust among US banks in the run-up to the Lehman bankruptcy." RBS FX Strategist Greg Gibbs reiterated today that the biggest risk factor is China's financial bubble.
Gibbs emphasizes the need to continue keeping an eye on China very closely, noting that "We must not be easily calmed if and when the PBoC inject liquidity, we must watch where term lending rates settle; if the yield curve steepens rapidly from one week out it will be a sign of banking sector distress." Growth in China will likely take its toll if banks act more cautious from now on.
What make this cash crunch in China especially peculiar "is that officials are tightening the proverbial screws tighter and longer than participants are accustomed, thus the tightness cannot be simply attributed to last week's holiday" said March Chandler, Global Head of Currency Strategy at BBH.
Zero Hedge notes: "The explosion in funding costs echoes the collapse in trust among US banks in the run-up to the Lehman bankruptcy." RBS FX Strategist Greg Gibbs reiterated today that the biggest risk factor is China's financial bubble.
Gibbs emphasizes the need to continue keeping an eye on China very closely, noting that "We must not be easily calmed if and when the PBoC inject liquidity, we must watch where term lending rates settle; if the yield curve steepens rapidly from one week out it will be a sign of banking sector distress." Growth in China will likely take its toll if banks act more cautious from now on.
What make this cash crunch in China especially peculiar "is that officials are tightening the proverbial screws tighter and longer than participants are accustomed, thus the tightness cannot be simply attributed to last week's holiday" said March Chandler, Global Head of Currency Strategy at BBH.