Interest Rate Swaps Hit Record High As China Warns "Big Chance Of Bank Failures"

Tyler Durden's picture

Overnight repo rates are spiking once again in early trading as the typically smaller banks that are more desperate bid aggressively for whetever liquidity they can find. 5Y Chinese swap rates have also reached a record high as the Yuan reaches its highest since Feb 2005. Chinese authorities are clearly stepping up the rhetoric:


The gambit between the PBOC's liqudity provision and the growing dependence on their "spice" is clear - the question is, of course, will banks send a message (via the markets) to the PBOC or will they self-select (on first-mover's advantage) eradicating the weakest.


5Y Chinese Interest Rate Swaps have reached a record high (implying expectations priced into the market of rising interest rates)...


and short-term liquidity is problematic again as overnight repo jumps to 5.00% in early trading..


What everyone is wondering is - with the failure of 1 or 2 banks seemingly guaranteed - how will the contagion be contained? How will the interbank market respond when no one knows who is it? We know what happened in the US in 2008...


Charts: Bloomberg

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bunzbunzbunz's picture

<<<<< Free bitcoins:

<<<<< Ugly American

Deo vindice's picture

I don't think bunz is the kind who takes counsel to heart.

(But I'd love him to prove me wrong)

TruthInSunshine's picture

China is going to own all assets having real wealth, have the next reserve currency, and be the world's next economic superpower the likes of which human history has never before seen!

Everyone knows they're just a few years away from such dominance!

Make sure your children can speak Mandarin!


smlbizman's picture

what happen to our after hours friday bank closings...there were like 3500...or we all good now or did they just stop reporting?

Troll Magnet's picture

Man, I'm no fan of our own pols but I'd love to see fucking China collapse. Can't stand those arrogant fuckers. CORRAPSE, BITCH!

jonjon831983's picture

You've been brainwashed by your corporate overlords who have taken multimillion pay packages while they gut the workers on both sides of the oceans.

Troll Magnet's picture

Nope. I'm my own overlord. I just have a big disdain for China and their unruly sheeple who are some of the most filthy and obnoxious parasites in the world. There's a Chinatown in just about every country in the world. Think about that shit. Who invited these assholes to go and build their little filthy colonies in every corner of this planet? Nothing against the rest of Asia though. Hell, I love Japan, Korea, Thailand, Vietnam and so on. But I do see China as a big fucking tumor on this planet. FUCK CHINA.

LMLP's picture

Nothng would have been completed wiithout the Chiense help ...Whitey couldn't handle all the hard work....

They have "China Towns" to get away from arrogant biggots like yourself... and their families have probably been in the country longer than yours have... Go fuck yourself, they will own your ass anyhow!

Troll Magnet's picture

No they won't. And I'll be laughing my ass off when our military industrial complex destroys your filthy ass country, Chinaman!

Peter Pan's picture

"Who invited these assholes to go and build their little filthy colonies in every corner of this planet?""

Much the same could be asked of the USA amd its military bases all over the world.

And keep in mind that Chinese cooking hasn't killed as many people as the US military.

jballz's picture


You make a very good point, but how can we blame the Jews for this?


think, britchez!

ich1baN's picture

It's interesting because they consider themselves to be smarter than everyone else. The average IQ in China (which is probably raised 10 points) is 100. 

The Average IQ in America is 98. But before you say that they are smarter than us, you have to take demographics into account. There are 31% Mestizo-Americans and around 14% African-Americans. 45% of America is non-white by the more rigorous standards. Most studies show the average african american iq to be lower than the latino american average iq of 89, but I will include them in with the mestizos for the sake of simplicity. 

So if we set up the logical equation, since we know the Average IQ of all Americans is 98:

WA = wY + wX

we get:

98 = .45(89) + .55(X)

X = 105.36  

Therefore, the average of East Asian (don't forget the 1.3 Billion chinese of an average IQ of 100) are lower than the average white american IQ of 105.36.

I'm just presenting the facts....

dryam's picture

I never thought I'd ever be rooting for contagion.

rp1's picture

Damn, I'm changing my name to Fang.

max2205's picture

Translation of 1 or 2 to English = a fuck load folks

ChaosEquilibrium's picture

Don't worry .....the BOJ and FED are keeping the NIKKEI 'bid' near the flat-line.....just like the DOW today!!!!  VOLITILITY is now a ONE WAY PROPOSITION......UP!!

williambanzai7's picture

Banzai7 Cultural translation:  Chopsticks stuck in my nose!

Dr. Engali's picture

We can't have any banks failing, that's just too scary. Quick hit ctl-p and bail them out. Throw in a couple of distractions and the system is fixed. It's all an illusion anyway.

NoDebt's picture

Yeah, but they're SMALL banks, Doc!

"Just the tip."

maskone909's picture

Sothe banks are trying to bitchslap the chinese? Hope they dont fall for the same shit we did

LawsofPhysics's picture

Please, in the modern world there is no such thing as a "bank".

chump666's picture

yet some big uptakes in the AAA rated bond markets i.e Australia.


NoDebt's picture

Spin that big wheel.  Where's the next collapse start?

Europe?  No.

Japan (with the highest debt/GDP ratio)?  No.

China?  Hey, maybe 3rd time really is the charm!

obelisks's picture

it will be non-financial event in Japan- Fukushima

walküre's picture

I honestly think China is run by a few very powerful families and their cronies who are printing their currency in the basements of Beijing or Shanghai. That's why they convert paper to tangibles quickly and ride the gold and btc train like nobody else. They know their money is shit. The communist angle is just a cover.

W74's picture

Which is why crashing Ferraris is no longer recommended by Chinese investment brokers.

thestarl's picture

They sure are very very active in the Australian property market.

Lordflin's picture

Perhaps someone can make sense of this for me...

1) The past several years has seen a deliberate transfer of wealth to China (unless we are to believe that the psychopathic central planners in the West are that much more inept than the ones to the east of us)...

2) The West is doing it's best to sucker the Chinese and Russians into a war... so far they have not taken the bait...

3) The financial infrastructure appears to be fragmenting everywhere around the globe, and at any given moment it threatens to explode, implode, or just plode in general (literary license).

4) Everywhere at upper layers of government we have place holders... folks who are making no effort at all to govern, but rather are treading water, it seems, waiting for... for what?

I disbelieve there is some vast plan only because I have not yet met the man or woman smart enough to think one up... Lots of little plans, that I can believe... So what gives? I have a mind that finds patterns where there are none (this is sometimes called insanity) but even I can't make heads or tails of what appears to be little more than total madness (and the say I am nuts).

Perhaps someone here can unravel this mystery...

WOAR's picture

Treading water IS the plan. I don't think anyone expected this shit show to go on this long.

Keep in mind, several things that the U.S. has done clearly show that they expected or are planning for something to go on.

Billions of rounds of ammo, MRAPS for police departments (SWAT), cutting back on EBT to rile some people up, dozens upon dozens of scandals that affect every possible demographic (to rile them up), among other things.

I think most governments are just waiting for that ONE legitimate uprising, so that they can smash the hammer down while gleefully claiming they were "right all along" about the terrorists/tea party/insert group here.


In regards to WOAR, China and Russia are likely waiting for a domestic event like above to occur before they make any moves. The U.S's attempt to kickstart the WOAR before they lose power didn't work, so all that's left to do is wait.

W74's picture

The US now has plenty of broke young, useless males according to feminists, er, I mean impoverished and court-system-beaten throw into the fray.

Never woke up to this reality until I was staring down a street in Najaf with a dead, probably disease-ridden donkey in the middle of it while dozens of grown men sat around not picking it up and removing it.

I think the real question then becomes: how many of their own children will AIPAC send?  Answer: We need our boys at home to underwrite the loans, and make sure to keep enough goy slaving away, er we mean working to pay taxes and interest on the debt!!!

But now I'm just ranting truthitudes. Busy day tomorrow for this useless gentile male.

spine001's picture

The reason you can't find the pattern is that there is none to be found. What you are seeing is the typical behavior of a dynamic feedback loop acting on a non-linear system of multiple parallel paths. The behavior when the system is about to leave one attractor to go to another one is "chaotic", and can't be predicted. The reason is that the mathematical equations (a set of non-linear high order differencial equations) have a solution that is infinitely dependent on the initial conditions. Yes, an infinitesimal change on the initial conditions in this type of system produces an infinite divergence in the solution of the equations. The only way to understand this type of system is to understand the family of possible stable solutions. Meaning with stable a solution that once the system reaches that multidimensional space region, it stays there despite stimulation to leave the space. This stable spaces are called attractors of the system. Obviously we have been (the economy) in one of them, and the actions of the CBs are placing us at the boundary of the region of stability, by increasing the gain of the system (monetization, as the monetization increases the stakes in the game increase for all the players, one small error and they loose everything, thus the gain and velocity of change increase). Economists don't understand this, that is why they hire physicists and mathematicians to create the algorithms.

The point is that as the system evolves to another stable region or attractor, it will traverse any possible states at an apparent random order, but it won't stay there. Further, once the system is out of control, it can't not be brought back under control, something that plant control engineers painfully know, short of stopping the plant under control. Good luck stopping the economy!

Bernanke before and Yellen now, are playing with forces they can't possibly comprehend, and them along with a lot of our current elite suffer of megalomaniac syndrome and should be medicated, but rather than that they are being given the power and the tools to destroy civilization by our current leaders. Leaders who are thinking of themselves first and believe in the survival of the fittest. Funny enough, they don't even understand that last sentence, since survival of the fittest depends on the fittest for what? Politicized civilization or wilderness! They are the ones that will loose the most if they destroy the status quo, but the paradox is that they are the ones enabling the CBs to place them at risk. Conclussion, they don't have a clue of the forces they are unleashing.

Oh, and don't wait for a single event, there will be none, simply a continuous evolution towards a new stable system, nearly everything that can happen will on the transition. It's mathematically impossible to predict when we will reach that point or how we will reach it.

jballz's picture


Yeah except it's all a fucking collective dream,

Get out of your head dude, buy a hooker or something.

Hypothetical- if you dosed, sy everyone with an internet connection, with lsd or similar substance for say 48 hours, wha would happen to the world markets?

Probably we will never know, but I believe the whole fucking thing is on autopilot. It's  od's ineffable plan, there is no system at all to deviate from.

Wilcox1's picture

In simpler words we are a giant petri dish of mold growing until we exhaust our nutrients.

jballz's picture


I knew it was the Jews again. 

But I want to hear about this donkey in Najaf. Tell me more.

Lordflin's picture

Yes, I get that... but then, why the transfer of wealth...

I get that these folks owe allegiance to no nation... and view the world as their playing board, while other humans are the pieces... most of whom, in their minds, range somewhere between pawns and ants... But the Chinese are a somewhat clannish breed, and are apt to take their board and go home.

Perhaps I just under estimate the stupidy...wife and friends tell me I keep expecting too much from people.

But it does appear on the surface that planning war and transferring wealth are mutually exclusive...

spine001's picture

They are not mutually exclusinve. When you do scenario planning and contingency planning you plan for both. Your try to manage the outcome to your best scenario, but you also plan and act to be ready if things don't go your way.

For instance for the end of the petroleum era, there are two contingencies, blue scenario, where that point is reached in a multigovernmentally managed way, and red scenario, where the point is reached in a confrontational world. And you need to be ready for both.

W74's picture

Do Chinese bankers commit Hari Kari or do they Golden Parachute themselves into Singapore to live out their old man years fucking bitches and crashing Ferarris?

disabledvet's picture

"how is one to know whether an irrational exuberance has taken hold?" "that escalated quickly" indeed.

Cheyenne's picture

Interest rate swaps spiking up? Now why would someone worry about such arcana? From the latest OCC derivatives report (p. 11):

"Interest rate contracts continue to represent the lion’s share of the derivatives market at 81% of total derivatives."

Fuck it, Dude. Let's go bowling.

Ham-bone's picture

Bowling...any sport that involves beer is ok w/ me...n the Cohen's are true genius'

hugovanderbubble's picture

Imagine bankruns in just one tiny Chinese bank, will be funny.

TheRideNeverEnds's picture


So is this just a little bullish or like really bullish, I am a bit confused.

ActionFive's picture

Cny getting stronger on usd after they downgraded usa/debt.

Time for bank stories again..

dreadnaught's picture

one word: Donna Chang

jballz's picture


This is because of the Jews right?


youngman's picture

Do the Chinese "lose face" like the Japanese do....where they are ashamed to show themselves in public for their failures and might even take their own lives....or do they just get a job with the Communist party and go on