China Also Tapers, Forced To Promptly Bail Out Money Markets

Tyler Durden's picture

Overnight we warned that short-to-medium-term money market rates had spiked to record highs (1-Year rate-swaps over 5.06%) and that the PBOC was bravely standing firm on its (lack of) liquidity injections... that didn't last long. Despite the PBOC's veiled ongoing attempts to 'taper' its own liquidity provisions, as MNI noted, echoes of the June liquidity crunch were heard again in the Chinese money market Thursday and authorities moved to extend trading amid a surge in rates which quiet injections of funding by the People's Bank of China failed to stem. Jitters in the Chinese interbank market since the PBOC tried to force deleveraging in June highlights the nervousness of an overstretched banking system that is reliant on the central bank's largesse to ensure stable operations. 


Via MNI,

Trading in the interbank market was extended by a half hour, traders said, citing a notice from the China Foreign Exchange Trade System, something which hasn't happened since money market rates hit record levels back in June.


The PBOC admitted after the close, via its official microblog, that it used Short-term Liquidity Obligations (SLO) to add funding to the market. The bank didn't specify when it added the funds but, in another direct echo of the June panic, the PBOC said it is prepared to add more.


"We will continue to provide liquidity support via SLOs to qualified financial institutions if necessary, depending on the progress of fiscal spending," the bank said, adding that liquidity conditions are volatile because of seasonal factors.




Some traders expect a degree of calm to return once Christmas and the January 1 holiday have passed and liquidity returns to the system.

But the Chinese New Year comes soon after that, beginning at the end of the month, and the authorities have signaled they intend to wean China's notoriously mismatched financial system off its addiction to credit creation over the longer-term, indicating that rates will remain volatile in the weeks and months ahead.

This is a problem - and this is why the banks are terrified - Goldman's projection of Chinese debt to GDP through 2014 and 2015 is incredible...


and problematic as corporate bond yields surge higher... (with repo only maintained by government largesse)


It seems clear that the Chinese banks' PBOC taper tantrum will not allow the central bank to withdraw painlessly.

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slotmouth's picture

Shiboring into your ass.

remain calm's picture

How the fuck is Japan so stable? Japan is the biggest house of cards and it is rock stable? WTF?

Pure Evil's picture

The Japanese house of cards is in the Stratosphere along with everyone's attention while the base has already started collapsing.

aVileRat's picture

JPY is the worlds carry trade / short pool. Think of it as a very large Beta zero, zero dividend ETF. Everyone will use it as the net short to their long positions. Everyone does.

No growth vs. global peers. No resources. No superior tech, creeping inflation and a dead workforce/zero productivity gains in the last 30 years vs. China/Korea. Perfect short.

Abenomics will fail because the last 2 arrows will never leave the quiver. If Abe cuts back on the pork/cradle to grave entitlements for the workforce, he will be thrown out. The final arrow of corporate governance reforms will have him shot in his PM Chair by the Kaiban's. Do you really think the Toyoda family or the Fuji's will give up their 0.01% ownership by proxy 80% shareholding structures ? Do you really think the Diet will force UJF or Mitsui to use FASB accounting after it was suspended 20 years ago ? ha.

To distract from failing to launch those last 2 arrows (structural reform & market reform) Abe will force them to militarize. A massive kick off by porking Toshiba & Honda Heavy Industries will snap the 30-year stagflation but will likely prompt further conflict with China. Nuclear lobby blocking Canadian LNG will likely accelerate their current account deficit towards the 8-year bond market lockout. 

Any fund manager who says chase the TOPX is chasing quantative easing money, which I guess is a form of J-alpha these days. Will this be a sustainable trade ? Not if the militarization of the Ruher is anything to go by. In the short term ? Sure, why not.

Gold speculators should not be crying at 1200/troy. Everyone on the forum knows the paper market is collapsing since it's primary role was to facilitate hedging for PHYSICAL producers. No phys production? no need for deriv's. Not rocket science. 900/oz. until we start seeing a few  big-cap Ch-11's. Gold producers are going through the same structural shift which affected the oil industry in the 1980's when "Big Elephants" moved beyond their WACC. Barrick is just this generations Amoco.



Ying-Yang's picture

900/oz..... interesting explanation

allowing for clearing of derivs

Al Huxley's picture

PBOC needs to take some lessons in the art of crowd management from the FED.  I hear Bernanke's free now, maybe they should make him an offer.

Pure Evil's picture

Why do they need Berstanky when they can just put a ctrl-p button in a cage with a crack monkey. Just make sure to wire the ctrl-p button to both the printer and the crack dispenser.

Al Huxley's picture

For his masterful crowd management techniques - convincing everybody that taper is good for the stock market and the bond market.

Dewey Cheatum Howe's picture

Withdrawal from dependency never is painless.....

Al Huxley's picture

Maybe the PBOC should sell gold and buy some TWTR and FB...  Quit fucking around with this 'monetary policy' and get on the momo train baby!

Sufiy's picture

Al, you will like it:

Bloomberg: London Gold Vaults Are Virtually Empty

 Bloomberg quite suddenly provides some really interesting information about the state of the gold market and ongoing manipulations around it these days. Could the reports about JPMorgan being Net Long Gold now be correct in the end?

Quinvarius's picture

From a purely paper perspective, this is the kind of thing that happens when you attempt to rig the price of a global asset class that 3/4 of the world saves in, called gold.  Good job.  What do the bankers actually expect to happen?  All they did was tell everyone that all their savings are worth 1/2 temporarily. 

Al Huxley's picture

It always kills me that I'm supposed to believe there's a bear market in gold due to lack of demand, when at the same time other 'store of value' assets (collectibles, jewelry, art, etc.) are going through the roof.  That tells me loud and clear that the super wealthy know what the risks are with paper money.  And yet I'm to believe that this class - the people with GENERATIONS of experience in preserving and growing wealth, who've managed family fortunes across the collapse and disappearance of currencies, have suddenly lost all interest in holding gold as a store of value.

LawsofPhysics's picture

Well put.  There is a reason the same powerful families seem to remain in power for generations.  Something about always having "dry powder" or purchasing power (in numerous forms) available when they need it.

viahj's picture

"blood in the streets" coming soon to a city near you

fooshorter's picture

The elites know what they're doing don't kid yourself it ain't for your benefit.

Sudden Debt's picture

Maybe they should do one more Big Print. You know... and then they'll stop.

One more time...

the last time...


after that cold turkey...



Dr. Engali's picture

The central bankers crack me up. They are trying to withdraw liquidity from a system where nobody has any money to service their debt, let alone make up the liquidity gap. The uberwealthy aren't going to do it, they are too busy buying real things like land $259,000,000 paintings.

disabledvet's picture

Capital has been fleeing China in absolutely staggering amounts since 2008. This is your "mismatch." It's called "British Columbia"...let alone San Francisco and Australia. The question that pops in my head is do the Japanese sink the Chinese fleet in the next couple of days or do they wait until after the New Year?

eclectic syncretist's picture

This is pretty much analogous to what's probably going on the the basement of the Federal Reserve these days.

LMAOLORI's picture

Well Dr. Engali the well hasn't totally been run dry yet so until it is the beatings will continue and the great bank robbery will continue as planned. Just think about it the banks are making billions a year in IOER but the Fed can stop remittances to the treasury and in the meantime the interest rate on the debt is held down as a token gift to the politicians who allow it all to continue unabated.


QE: The greatest subsidy to the rich ever?


Fed May Stop Remittances to Treasury for Years

Fed Faces Explaining Billion-Dollar Losses in QE Exit Stress

Pretty amusing this is from the far left Nation even they have somewhat caught on

Obama Is Trying to Fix Inequality by Hiring the Same Hacks Who Caused It

Dewey Cheatum Howe's picture

The sad commentary on all this as authoritarian and control freakish China is supposed to be they are less manipulative of their financial system than the US is. It almost makes me wonder if this Chinese did this on purpose to just expose that point and undermine the FED's credibility.

Pure Evil's picture

How much more undermining of FED credibility can there be?

In my estimation they've already dug a hole which will reach China in less than a year.

Of course the Chinese have been digging the same hole and are on course to meet up with the FED and the Japanese somewhere off the Senkaku Islands.

Dewey Cheatum Howe's picture

There are plenty of great unwashed masses out there still. Don't underestimate the power of the propaganda machine in keeping the masses asleep and redirecting who is responsible when they feel the pain on a personal level where it can't be ignored.

If one has any critical thinking skills the question you ask is why. Why when the Chinese do it you get one outcome while when the FED does it you get an entirely different one. And more importantly why is that outcome always the same when the FED opens it's mouth? Cut through the partisan dividing bullshit used to obfiscate and confuse which seems to work quite well when you condition a population to not criticially think and ask basic and answer basic questions like who, what, where, when, why and how.

Who tapered?

What did they do to taper?

Where did they do they taper?

When did they do it?

Why did they do it?

How did they do it?

Why did we have 2 different outcomes when both did it? - See above for answers if approached from a criticial thinking standpoint (hint the answer is most likely in the how).


Like putting toothpaste back in the tube.  Monetary inflation is RAMPANT.  Yet Bernanke had the audacity of saying it was actually to low!  Below their 2% target.  Incredible.

LawsofPhysics's picture

When you are going to commit fraud (break the law), it helps if you own congress, that way you can simply change the rules.  Same thing here, just simply change the definition of "inflation".

LMAOLORI's picture

"When you are going to commit fraud (break the law), it helps if you own congress, that way you can simplychange the rules.  Same thing here, just simply change the definition of "inflation"."


Or lie about the statistics on employment lol


Get ready for lies and Labor Department statistics

1stepcloser's picture

I just got a tweet from Woo!  Sawhere Jen, Burnakie.....COOOCK SUCKA!

GrinandBearit's picture

Same as US market of late 2008.

House of cards... made of all Jokers.

NoDebt's picture

I've always said when the next crisis hits, it's going to come from some direction nobody is expecting.  Some direction most are blind to. Why do I have such difficulty believing China's over-levered banking system might just be it (not Japan, not the US, not southern European countries)?  Is it because they have such apparently infallible top-down control over things that they could instantly hault things and yank them back, even if a collapse were to somehow start?  They certainly seem to be envied by the rest of the world economies for that perceived level of control. Everyone has China envy.  What if that control is more illusion than reality?

Is this my blind spot?  Is it all of ours?

Dewey Cheatum Howe's picture

It is usually the one you never see coming that does you in. As much as control freaks try to you can never remove the random variable completely from the overall equation.

Dre4dwolf's picture

The fed vs pbc.

Thats the theme this week.

The fed tapers (didn't really taper anything) and pbc was forced to retaliate with its own taper barage, but its backfiring in china faster than it is here.


April is going to be bad in the U.S. 

starman's picture

Well US cities are "receiving retired military combat vehicles" , interesting!

Pure Evil's picture

Better to protect you from the evil machinations of retired elderly people on fixed incomes that will be rioting in the streets once Walmart raises prices to pay its employees $15 an hour.

fxrxexexdxoxmx's picture

Will not be the elderly that sparks havoc for Barry and his platoons of brownshirts. It will be a bunch of Barry wanna be's that gets the ball rolling. 

Supply interruption will be the tip off that the hunger games have begun.

falak pema's picture

Aha! I see my question was pertinent. And what does Abe do as the guy in City? Do they taper their Havanas?

Draghi is all sterilised in his pampers diapers.

kevinearick's picture


If you want upward mobility, you must accept downward mobility. If you want a lower limit, you must accept an upper limit. Traversing the limits requires relativity, and is limited by relativity.

If your house is on the 7th floor and going down to the first floor means that you must wait in line again, and may never get back to the 7th floor, you will be quite reluctant to leave the 7th floor. The assumption creates the behavior, which is emulated to become law, locking up the system.

My wife wants to work, which means that we will both be working 24 hrs/wk, and we have to run a business to show our children how an economy actually functions. I can change diapers better than nearly every other female on the planet, but only my wife can breastfeed our children, and formula is a self destructive alternative. There are just certain limitations associated with each event horizon.

If I own my home, which is a home, not a house to be flipped, real estate price inflation, taxation, is corruptive. If I have a unit out back and rent it to a new family at the inflated rental valuation, I will short my own economy, because there is no way a new family can prosper at a wage/rent ratio of 2. Likewise, if I sell my beef, which is needed locally, to Japan instead, for a higher price, pretty soon I’ll be going to the food bank with everyone else, as the escalating real estate and transportation costs get baked into overall prices.

You can change direction any time you want, but not by extrapolating the future from the past. Gravity exists to the extent you accept its assumptions. Government always assumes it can redirect the water at a profit, measured as tax revenue from extortion. You are beginning with the highest prices and lowest quality in history. Don’t make the problem harder than it is.

“…he will have the weight of government on his shoulder…”

The kernel balances bias. Whether the opposite of order is disorder or random depends upon perspective, generation. Pi appears to be a constant, but it’s not. That’s memory. You are an antenna. Build your own instrument. The empire is just a reductive amplifier; ignoring risk with fear is its problem solution, blaming individuals for systemic error.

I employ metaphors because my code creates implicit variables. Once I release it, even I do not know how it works. It’s mobile, a creature of its own existence.

The professors just never could wrap their collective minds around the implications, so, naturally, they try to kill that which they do not comprehend, growing it, and shrinking themselves in relative terms, mapping finer detail in an increasingly irrelevant box, looking for an exit.

From the perspective of Kissinger & Kids, the immigrants to be exploited are children, globally, with a policy of enforced urbanization, in which parents compete to exploit each other’s children. That should work out well.

Look at the data. See what others do not.