China's Bond Binge Squeezes Non-Banks as Liquidity Tightens
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Borrowing costs surged for non-bank institutions as banks faced regulatory requirements, companies had tax payments, and governments sold many bonds.
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Overnight repurchase agreements (repos) are a loan using debt as collateral for leveraged bond bets in China.
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Non-bank institutions like brokerages and asset managers rely on repos and struggle more than banks when liquidity tightens.
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The central bank typically provides liquidity via open market operations, bank guidance, or statements to soothe cash squeezes.
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More liquidity scares may occur as China issues trillions in bonds for stimulus, crowding out non-banks.