Chinese Money Markets Face Liquidity Squeeze as Overnight Rates Spike to 50%
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Overnight borrowing costs for some Chinese institutions jumped as high as 50% due to tight liquidity and stresses in money markets.
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The cash shortage was caused by upcoming government bond issuance, market fears of defaults, and leveraged trades.
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The spike in rates is stirring memories of the 2013 cash crunch when overnight repo rates hit 30%.
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Traders attributed the tight liquidity to record bond supply and restricted bank borrowing channels.
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Average 7-day repo rates remain modest at 2%, meaning many can still borrow cheaply.