Holy SHIBOR Batman, We Have A Snow Problem

Tyler Durden's picture

In our relentless pursuit of the completely locked up Chinese interbank market (here and here), we stumble upon today. And boy was today a doozy. Both the 7 Day SHIBOR and repo rate, which effectively both show the same thing, i.e., the rates in the unsecured interbank lending market, have jumped to fresh multi-year highs after posting a slight improvement yesterday. And guess who is to blame (in addition to the Chinese new year) - why snow, of course.

7 Day SHIBOR:

7 Day Repo Rate:

And from Credit Suisse's Hong Kong desk, here is one explanation for what is going on in China:

China is no exception to the intense winter weather being seen around the world as unusually large parts of the country are getting hit with winter weather. Blizzard warnings across much of southeastern China have resulted in cancellations in Shanghai, Jiangsu, and Hangzhou, where all departing flights had been cancelled on Friday and delays were the norm all weekend. China Southern (600029) -3.2%, Air China (601111) -2.0%, and Chian Eastern (600115) -0.6%

Coal prices, remain low as prices at Qinhuangdao Port, China's largest import hub for coal remained unchanged from last week, following a selloff of RMB20-40 depending on grade last week. The sector likely was hit off the back of news that China's Ministry of Commerce, NDRC, and Ministry of Finance will continue to scale back export tax breaks for high polluting, energy intensive industries, like steels, non-ferrous metals, and construction mats. Obviously something that would hit coking coals as well. Xishan Coal (000983) -4.1%, while Yanzhou Coal (600188) -5.7%, though that's more likely on the still low Qinhuangdao prices then anything else. Angang (000898) -0.9% and Pangang (000629) -2.1%

Property actually held up ok, despite continued concerns over the property tax. Shanghai's mayor spoke last Friday after both China & HK closed, but instead of going into detail on the property tax, he instead spoke about the need to protect Shanghai's youth and ensure they can continue to afford to live in the city. The property tax remains most likely to be implemented on high end housing. Vanke (000002) +0.8% and Poly (600048) +0.9%. Interestingly he did say that the city's minimum wage would continue to climb, by at least 10%, while also saying the city would support it's migrant worker population. Shanghai based retail still got hit, New World (600628) -2.9%, Yuyuan (600655) -4.4%, and Bailian (600631) -1.9%

Finally it looks likely that the PBOC won't auction bills off tomorrow [ZH: today] as the announcement still has yet to hit the tape. Obviously liquidity remains a central concern for the market, though the 1-week SHIBOR is starting to come off again after last week's RRR deadline. [ZH:scratch that]

For those who are still confused by the PBoC's monetary schizophrenia, here is a good primer as to why they are even more cornered than our very own Chaircreature - On The Paradox Of Concurrent Chinese RRR Hikes And OMO Liquidity Injections