China Conducts Emergency Reverse Repos To Calm Money Market Liquidity, Fails, As 2 Week SHIBOR Hits Record 8.6%

Yesterday, when we pointed out the surge in the overnight SHIBOR, many were quick to dismiss this dramatic contraction in liquidity, because it happened to be a replica of a comparable such move before the Lunar New Year which did not end result in an end of the world type event. And while many ignored this very disturbing interbank lending lock up sign, there was someone who did not: the PBoC. According to Market News, "The People's Bank of China has conducted reserve bond repurchase agreements with at least one bank in a bid to ease liquidity conditions, local media reports said Tuesday. The National Business Daily cited an interbank market trader as saying the central bank injected at least CNY50 billion into the China Construction Bank on Monday via a 14-day reverse repo at 7.5%." Which incidentally is how it should be done: want to get emergency funding from your central bank? Sure. But it will cost you a whopping 7.5%. Now the question of whether CNY50 billion is enough (and in related news, the USDCNY parity just dropped to a fresh all time record low of 6.4690) is a different matter altogether: we expect to get today's updated SHIBOR fixing any second, and have a feeling more reverse repos will have to be injected before this is over.


The official China Securities Journal also reported on reverse repos of CNY50 billion but said that two banks were involved. It did not identify the participating lenders.

Monday's reserve requirement hike -- the sixth of the year -- has sent money market rates surging to levels not seen since the pre-Chinese New Year holiday scramble for funds in late January.

Let's hope that like last time, and every time there is a liquidity crunch, the central bank cartel can step in and save the day. After all, all it takes for the global ponzi to get the See No Forest treatment is just one failure.

Overnight SHIBOR yesterday...

And today:

1 Week SHIBOR yesterday:

And today:

But more important is the terming out of the liquidity freeze, with the biggest overnight move affecting the 2 week SHIBOR which just an all time record:

And a longer view - note the record