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Chinese Lack Of Liquidity At Dangerous Levels
A topic we have been following for some time now and which continues to get no mention in the broader media, is the accelerating liquidity crunch in China, as demonstrated by surging repo rates between banks, both ultra short-term (7 days) and slightly longer dated (30 days). As the chart below demonstrates, just overnight the 30 Day repo surged by 19 bps to a fresh record of 4.25%. Seeing how this was in the 1.75% range as recently as 45 days ago, China's banks are currently scrambling to fill the 1 month secured borrowing void. Some have said this liquidity deficiency is purely a function of the Agri Bank's upcoming IPO sucking out all available liquidity, yet with subscriptions to that becoming open starting July 1, the real explanation lies elsewhere. Are China bad loans finally catching up with the banks? We should find out soon enough - the PBoC will flood the market with CNY201 billion this week, the biggest reliquification event in over 4 months, to "smooth out volatility in money markets", as interactive investor points out. If that is unsuccessful in bringing repo rates lower, it will be time to panic as China does not have the same misrepresentation apparatus that the ECB/IMF does.
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Agreed. And I thought it was pressure from The Great Obama and Little Timmy that prompted the idea of yuan revaluation...
Surging repo rates also represent a material distrust between the banks. Every bank knows that every other bank is holding garbage on their books, lying about the valuations. None of them want to get caught holding the shitbag when the music stops. The fact that this rate has more than doubled in about a month is truly frightening.
Exactly +1
I don't understand the wishful thinking on Yuan speculation, that you can get a 7X return on a depeg. Not going to happen. Instead, should the Yuan be amongst the various currencies that have collapsed, notably the ruble or the forint, it will provide serious problems in valuing the $US and the Yen.
Abandoning the U.S. treasuries market for Yuan has got to be a sure sign of insanity, since you are throwing away bonds in an established democracy for a communist currency.
But then again, corporate America and communist China have come to resemble one another in many ways.
For one, communist party apparatchiks are probably trading their Yuan for Yen and beemers, while the conventional wisdom is selling you a Yuan etf on the 'fabulous' revaluation of the Yuan.
This Yuan revaluation has more than the seed of desperation here, but I believe that any time the Yuan surges in value, this will lead to knock on effects in the treasuries, where rates are lower and lower.
http://stockcharts.com/h-sc/ui?s=CYB&p=W&b=5&g=0&id=p56687925885&a=20286...
So, the SHTF in China first. Who'd have thunk it?
Some are saying that the yuan appreciation will impact Commercial Real Estate in a big way. If China is in such good shape, why has the Shanghai been a laggard for the past year. Not good for US internationals.
the chinese stock market has had the death cross ie the 50dma below the 200dma
for a while now so i expect a deep plunge to start soon
The french stock market also went under the death cross a while back as well
other markets close but Chinese looks the worst
"Beijing Reliquification"
"Are China bad loans finally catching up with the banks?"
Didn't you just report on how China is trying to put the breaks on the housing bubble over there?
Limiting liquidity may be the best way.
This is probably unrelated, but there are indications of government mandated power shutdowns throughout manufacturing areas of Shanghai in July and August
seems like the only thing they will be making now are bubbles.
They shouldn't have listened to bernanke
Pop goes the fortune cookie.
Yuan *has* to go down. Their ponzi is larger than ours.
They broke the peg because the deflationary trends in the USD were killing them. THAT is what this is showing.
When repo rates climb it is a sign of deflation, not inflation. They need more dollars so that they can continue to print yuan into their own economy to buy them with.
They are on their own now, with MOUNTAINS of bad debt, years and years worth of literally uneconomical development, a property bubble light years worse than ours in terms of price/income ratios, and a grossly polluted environment.
China HAS to print. They have no choice but to radically cheapen the yuan. People seriously need to understand where Chinese liquidity came from. It came from dollar credit. With less dollars flowing in *and* a peg, the yuan was rising with the dollar, because of less yuandollars.
China's not a bubble
China's a bubble
not a bubble
is a bubble
...make up your minds
That EURO buying support has returned ...
http://stockmarket618.wordpress.com
http://www.zerohedge.com/forum/latest-market-outlook-1
What's that spike in mid-February?
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