As out friends from Fasanara Capital remind us, despite record liquidity injections by the PBOC in the past few days, Chinese repo rates have resumed continue breaking higher.
The move is odd, given ongoing record liquidity injections (RMB 680 bn last week, RMB 150 bn today).
As Fasanara's Francesco Filia writes, "the mind inevitably goes to excess credit troubles in China and potential for CNH selling-off" and adds that the "move directly affects leveraged positions on bonds, funded by short-term repos."
While so far, the currency and the SHCOMP remain stable, it is a notable trend to watch.
CNY IRS(7D REPO) 12MO
China Monthly Foreign Exchange Reserves: next release on the 7th of May