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Bloomberg
China’s money market is bracing for yet another squeeze.
A record 2.3 trillion yuan ($340 billion) of negotiable certificates of deposit—a funding lifeline for medium and smaller banks—are set to mature next month, adding to the stress of an official deleveraging drive that has pressured onshore bonds lower in all but two months of this year.
The flood of maturities comes at an especially challenging time for the nation’s interbank market, with lenders hoarding cash every September to satisfy quarter-end regulatory checks. Money rates spiked in April and May, with the government rolling out a range of deleveraging measures. Markets felt the squeeze again in June amid regulatory requirements that helped push the yield on NCDs to a record. The yield on three-month AAA contracts was at 4.40 percent, compared with a peak of 5 percent in June.
“Unless the People’s Bank of China takes very strong measures to revert market expectations—which is unlikely—money rates are likely to climb in fluctuation next month amid the large NCD maturities,†said Liao Qiang, senior director of financial institutions at S&P Global Ratings in Beijing.