Chinese Sovereign Risk Spikes Most Since Lehman

Tyler Durden's picture

With the nation's short-term funding markets in crisis mode - no matter how much they are jawboned about temporary seasonal factors - it seems yet another indicator of stress is flashing the red warning signal. China's sovereign CDS has spiked by the most since Lehman in the last 3 days - up 55% to 140bps. This is the highest spread (risk) in 18 months and looks eerily similar to the period around the US liquidity market freeze. Hedging individual Chinese bank counterparty risk is hard (given illiquidty) and so it would seem traders are proxying general risk of failure via the nation's sovereign risk (and stocks which also languish at post-Lehman lows). On a related note, Aussie banks have seen there credit risk rise 50% in the last month as they suffer domestically and from the China contagion.

China's 5Y CDS spiked to 18 month highs...


as CDS is tracking 1-month SHIBOR extremely closely...


and the more liquid derivative play on this weakness - Aussie Bank CDS (pressure by domestic and Chinese issues)...


Charts: Bloomberg

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DaddyO's picture

So when things get tight, who will China borrow from?

Will the Bernanke float a little payday loan to them?


prains's picture


and.....time to start exercising, here's a good start.....

Richard Chesler's picture

Never attribute to illiquidity that which is adequately explained by insolvency.

0z's picture

"Banks need more liquidity"

Translation: There are no buyers.


-Where's my Money!?

-Don't you see all the IOUs stacked over there in the corner? Those are your money now !

-And what do the IOUs' counterparties hold?

-Other IOUs, of course!

Dr. No's picture

They have a central bank too.  They can "loan" each other Yuan all day long if needed.  Now, if you are worried about the peg, I am sure the bernak could crank things up to keep the peg alive.

NeverForgetSilver's picture

Hmmm, not sure whether they sell their $3.5 trillion foreign bonds?

fonzannoon's picture

Yep I am sure it's just a lot more people dropping dead recently. Nothing more.


"AMP (ASX: AMP) is not only one of Australia’s largest fund managers with one of the largest financial planning networks. It’s also a major provider of insurance products.

And it was this insurance division which was the focus of today’s earnings update. In the announcement, the company blamed “poor claims and lapse experience in its Australian wealth protection business” as the major contributing factor to the downgrade.

AMP also highlighted that “the industry is experiencing increased pressure on insurance claims and policy lapses” as well as noted “a lower result in wealth management relative to market expectations”.

ApollyonDestroy's picture

We're getting so close!!!

ZeroPoint's picture

Fortune cookie says: 'The only winning move is not to play'.


Temporalist's picture

Here is another: "Keep your plans secret for now."   Whoops too late!

ekm's picture

Tripple Lehman coming

Inthemix96's picture

Hope so Ekm,

Then we can start hanging the bastards.

Lets hope its Spifty times that amount.

ekm's picture

Elite infighting.

Very, very bloody.

Inthemix96's picture

Nice mate.

Looking forward to watching it in HD on a 95" 3D Wrap Around Special.

The fuckers deserve no less mate.

sudzee's picture

1.2T squared. Feral Hogs have been warned.

Its Only Rock N Roll's picture

I think the bomb has gone off but hasn't been revealed yet

Jayda1850's picture

This is all well and good tyler, but I cant take another night like last night. Last night, I was so enjoying the overnight carnage on the shanghai and the comedy and entertainment that would ensue during today's trading day. Was so dissappointed at that ridiculous recovery that I'd rather not get my hopes up. So please, no more china crashing stories until after the close or if markets halted limit down.

Devotional's picture

Is there a list of banks that are exposed to the credit cancer in China? What dominos stand to fall? For example, how much exposure do Eurozone banks have to China?

PaperBear's picture

What about the interest rate swaps ?

Panafrican Funktron Robot's picture

Each .01% move on the 10 year is $2 bln being made or lost somewhere in the IR swap system.  Since May 1st, it has gone up almost 1%.  That's a $200 bln dollar movement.  Now, consider who might have the most to lose on that sharp of a rise in yield in such a short amount of time.  

Temporalist's picture


Chinese workers holding US boss say wages unpaid

"Chinese workers keeping an American executive confined in his Beijing medical supply plant said Tuesday that they had not been paid in two months in a compensation dispute that highlights tensions in China's labor market.

The executive, Chip Starnes of Specialty Medical Supplies, denied the workers' allegations of unpaid wages as he endured a fifth day of captivity at the plant in the capital's northeastern suburbs, peering out from behind the bars of his office window."

Renewable Life's picture

uh oh, Obamacare just got more expensive, what will those HMO's and Hospitals do, when they can't charge $22 for a bandage and buy it for $12 and the supply company can't sell it for $12 and manufacture it under slave labor conditions for $59 cents??????????  

What, you mean American's arent "entitled" to this system forever??????

ActionFive's picture

Now troubles for those challenging SWIFT.

Fix It Again Timmy's picture

You know when you build huge "ghost cities", well - that can't be good...

Tombstone's picture

Benny still has enough QE to stem any blowups.  He has the power to save China, Japan and Europe.  Look what he has done for us.  A$15 trillion bailout should plug the dam. 

disabledvet's picture

i'm not sure i'd trust the Hong Kong dollar here actually (which has been pegged to the dollar since 1982 I think.) in other words "China is flying apart." they have long memories of the Nationalist's "Great Hyperinflation of the 1930's" over there...just like the Germans obviously do of their's and the US South does of their's here in the USA. China looks to be in deep doo-doo right now but we'll see. nothing wong with the New Taiwan dollar of course...nor maybe even the South Korean won actually. We'll see about Singapore though. "ain't no shortage of gold in that area of the world."

rosiescenario's picture

Anyone have a handle on recent silver sales in China?

walküre's picture

How do you say "Bail In" in Mandarin and Cantonese?

Confucius is confiscating