SHIBOR: We Have A BIG Liquidity Problem

Tyler Durden's picture

When two weeks ago we first pointed out the surging Chinese weekly SHIBOR (following up on comparable observations from last summer) it prompted a variety of bemused responses, the bulk of which were of the now traditional "this is irrelevant" variety. Too bad. Today, the 7 day SHIBOR (and repo rate) has just surged to new multi-year highs and has literally exploded from 2.5% to 7.3% in a few short days. Two weeks ago we said: "In a nutshell: there is no marginal liquidity left in the world's
fastest growing economy. Eventually this will dawn on the world. Until
then, BTFD." Looking at the SHCOMP's performance over the past two weeks, this has in fact dawned on the world. And when the headline scanning algos running our own stock markets realize that the world's biggest marginal economy has absolutely no short-term liquidity left, the aftermath will be very ugly.


7 Day Repo:

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
RockyR's picture

with all of the money flow into china, how is this claim possible?

Sudden Debt's picture

Benny printed dollars on paper... that's not liquid...





DarkMath's picture

China can't let all the money coming onboard stoke inflation. So they are jacking up rates and pulling cash out of the system to prevent food riots from getting out of control. The result is that liquidity dries up. This is exactly what China wants.

ThreeTrees's picture

Somehow I doubt this is what China wants, more like how it's reacting.

ColonelCooper's picture

I just thought it was because they were spending all their money on cheap gold and silver.

Bonesetter Brown's picture

Is this Chinese New Year related? Similar to a year-end or quarter-end spike in LIBOR?

I can't think of a reason why, but seeing the year-end SHIBOR spike followed by a decline, I can't help but think of Chinese New Year celebration start late next week.

thegr8whorebabylon's picture

Bone, are you related to Donny Darko?

trav7777's picture

big, bitchez...

the euro has been on a stampede as well, and euro POG blowtorched...despite printing by Ireland.

The reality here is that china has tried to put on the brakes as far as printing/ponzilending/liquidity - just a little dab on the pedal.  And, suddenly without that crack, the whole thing threatens to seize up

jus_lite_reading's picture

Just goes to show how fragile the markets really are. The collapse of the USSR occurred within hours.

Mr Lennon Hendrix's picture

Within hours of their oil production peak.

CrashisOptimistic's picture

And so very few see that relationship.

aerojet's picture

Can't fucking come onto any one of these discussions and not get some "peak oil, OMGWTFBBQ" type comment.  It's infuriating.

Mr Lennon Hendrix's picture

Russia's oil production peaked in 1989.

tmosley's picture

You idiots seriously confuse cause and effect.  Their oil production peaked because everyone went home while the country collapsed.  The production figures were probably fraudulent to boot.

ColonelCooper's picture

So you're mad at yourself for being dumb enough to come back time and time again?  Self hatred isn't productive.

snowball777's picture

No, he's mad at himself for being an idiot who believes in "abiotic" carbon chains.

tmosley's picture

Oil digesting microbes have been found a kilometer underneath the Atlantic plate, thousands of miles from any known subduction zone (  Whence cometh their food?  Further, when those bugs die, they leave behind oil from their membranes.  Not exactly rocket science.

The only question is the rate, which is clearly pretty slow.  To say it doesn't exist is magical thinking.

trav7777's picture

well, you kinda got this problem that the US peaked in 1970 and within a couple of years, everything was falling apart for us; we were in straight-up hyperinflation, abandoning gold peg, nearly having to go to war in the ME, our industries collapsing, etc.

And the USSR peaked in 1989 and then within a year or 2, the nation completely ceased to exist.

cougar_w's picture

But then they got over it. Or maybe the mafia took over. Sorta hard to tell from the outside, actually.

Spitzer's picture

I sure hope its big.

I am getting sick of waiting for this thing to blow up.

I think Antal Fekete finally figured out the bond market. His latest piece is definitly worth a read.

rocker's picture

I sold 75% of all positions today. And I am not done. New buys, short positions only.

Double down's picture

Thanks Spitzer, a really good article.

hbjork1's picture


Thanks for the link!

Fekete's analysis explains a lot. 

Working out of the current situation will be painful.

LowProfile's picture

Working out of the current situation will be painful.

LOL you think it can be "worked out"?  No offense, but it's more like push the 'reset' button!

Sad Sufi's picture

Good article, which helps broaden the discussion on "hyperinflation" versus deflation.  Thanks.

duncecap rack's picture


I am new to the mechanics of finance so there is something I don't understand about the linked article. Could you please explain buying long term bonds and selling short term tbills  and pocketing the difference in yeilds? I have long wondered who was buying long term US paper at ~4.5% when the stated goal of B.B. is to stoke inflation. This seems to hold the key to why anyone would buy such a dubious asset. If you could explain it I would appreciate it very much. Thanks.

AUD's picture

When you 'buy' bonds you are in fact making a loan, when you 'sell' you are borrowing.

Thus you borrow short term at a lower rate, lend at a higher rate & "pocket the difference".

AccreditedEYE's picture

The reality here is that china has tried to put on the brakes as far as printing/ponzilending/liquidity

The new world indeed. China showing leadership while we show no backbone for pain (read: doing the right thing) in any form.

aerojet's picture

What leadership?  They still execute anyone they don't like!

hbjork1's picture

North Korea executed a Finance Minister last year.

China also fired one some time ago.

Xibalba's picture

Never underestimate a crazed Fed Chairman..

plocequ1's picture

simple solution. Press the fucking button. Its all good.

jus_lite_reading's picture

Or change the accounting rules... you know, Enron style!

Sudden Debt's picture

I don't know... let's ask Madoff...

JW n FL's picture

Both! with a lil dis-information on the side for me please!

SwingForce's picture

First of all, Ireland can't print, I don't care what they say. They would have done it BEFORE the bailout, and Germany would be screaming right now.

Another thing, I searched CNBS for "Vallejo", and nothing came up.

Everything's a lie, except Tyler's charts- The Charts Don't Lie.

jus_lite_reading's picture

You do know that when they have advanced knowledge of a disastor, they willnever make it public--- it's about keeping the clam, until whatever happens, happens.

Therefore, how many MSM news outlets reported on the sunrise 2 FULL days early in Greenland?

How many reported about the record food inflation across the globe?

Or that China stated the US is no longer number 1 in the world but they are?!

Or that there have been an additional 3 mass bird/fish kills in the last two days?!


OR that Japan declares they are in a state of crisis, short of total collapse?!

OR that Australia's food exports might be cut to 20% this year and next?!


Why you ask? Because the powers that be don't want the masses informed of the truth, but only distorted reality TV



NOTW777's picture

this has to be dismissed - time for another cnbc obama campaign rally

sue h heralding all the jobs "created" by obama and immelt

NOTW777's picture

wow, sat night live on early

SheepDog-One's picture

I stopped reading after 'learnt'.

Stormdancer's picture

You just "stopped out" on some of the most insightful economic commentary available today.  Good luck.  Some of the best analysts are not American by the way...and they even have (gasp!) some different spelling conventions.  A multi-coloured world you might say....

DonnieD's picture

Hope the chinese didn't do home loans based on SHIBOR + 2%.

The Axe's picture

This is second time it has done this in the last 2 weeks only to go back to 2.50 from almost 7...why I have NO idea...why would this trade like TASR...crazy

bingaling's picture

Yeah seems like something is sucking up liquidity then suddenly disappears ????