While Sweden is over-flowing with excess cash on bank balance sheets [7], it appears that banks in Hong Kong are desperate to borrow Yuan (or scared to lend) as overnight HIBOR just exploded higher to 9.45% - a record for the interbank offered rate. The HKD and CNY/CNH FX markets remain relatively stable (with Yuan fixed marginally higher again for the 3rd day).
From sub-2% a week ago (before The Fed hiked rates) to 9.45%, the overnight rates has exploded...
It appears as though it could be year-end window-dressing-related as 1-week rates also soared - but we do note the extent of the spikes are unprecedented even for year-end liquidty needs.
The last time 1-week rates spiked like this, US equity markets crashed...
[8]
Did a Chinese/Hong Kong bank just blow-up and suck all the liquidity out of the room? Or is this delayed blowback from The fed's RRP?
We suspect it is unrelated but we do note that Caixin earlier reported the banking regulator has suspended the private-equity arms of 17 commercial lenders.
Charts: Bloomberg
