China Is Literally On The Brink of An Unprecedented Systemic Collapse
June 19th, 2013
PBoC refused to inject liquidity into the market
Short-term interbank lending rates surged 200 basis points to an all-time high of almost 8% on Wednesday after the PBoC refused to inject liquidity into the market. “The only explanation is that the central bank wants to send a warning signal to commercial banks and other credit issuers that unchecked credit expansion, particularly through the shadow banking system, will not be accommodated,” says CNC Asset Management’s Na Liu.
Read more: http://www.businessinsider.com/opening-bell-wednesday-19-2013-6#ixzz2WfHq6m4r
While all eyes and ears will conveniently and expectedly be on the Fed announcement and press conference in a few hours, the real action continues to take place in China, where the liquidity crunch is becoming unbearable for the local banks (and will only get worse the longer Bernanke and Kuroda keep their hot money policies). The CNY benchmark money-market one-week repo rate was 138bp higher overnight to a 2 year
high of 8.15%. The 7 day Interest-Rate swap rose for a record 13th day in a row jumping +10 bps to 4.08%, the highest since September 2011. China sold 10 Year bonds at a 3.50% yield, above the 3.47% expected, and at a bid to cover of 1.43 which was the lowest since August 2012. Moody’s commented that local government financing
vehicles (LGFVs) pose significant risks to Chinese banks. LGFVs
accounted for 14% of loan portfolios at end-2012 according to Moody’s.
Cash Squeeze in China, Interest Rate Swaps Rise Most in 22 Months; China’s Credit Bubble About to Pop; Shadow Banking Crackdown