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MNI: Warnings As China Interbank Liquidity Feast Bill Near Due

MNI (Singapore)
SINGAPORE (MNI)

Efforts to spur credit demand have led to flush interbank market conditions.

True

A liquidity feast in China’s interbank market is likely unsustainable into the second half of the year if the central bank acts to curb money supply based on economic and credit indicators that are now sending a warning signals, market analysts said, as they cautioned investors to reduce leverage in short-duration debt in their portfolios.

The People Bank of China may guide money market rates up, approaching their policy rates, if the economy continues to improve. As a result, investors may have to reprice the yield curve, said Qin Han, analyst at Guotai Junan Securities, suggesting it is time to prepare for any unexpected deterioration in liquidity conditions.

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A liquidity feast in China’s interbank market is likely unsustainable into the second half of the year if the central bank acts to curb money supply based on economic and credit indicators that are now sending a warning signals, market analysts said, as they cautioned investors to reduce leverage in short-duration debt in their portfolios.

The People Bank of China may guide money market rates up, approaching their policy rates, if the economy continues to improve. As a result, investors may have to reprice the yield curve, said Qin Han, analyst at Guotai Junan Securities, suggesting it is time to prepare for any unexpected deterioration in liquidity conditions.

Keep reading...Show less