From Bloomberg:
Repurchase transactions allowing investors to use existing note holdings as collateral to borrow money for one day doubled in the past year to a record 2.1 trillion yuan ($330 billion) on Monday. The cost of such funding in the interbank market has risen to 1.89 percent from a five-year low of 1 percent in May and has swung violently before, reaching 11.74 percent in June 2013. A similar contract on the Shanghai stock exchange climbed to 2.21 percent as equities rallied. Credit spreads at the narrowest in six years are being questioned as a steel trader delays making debt payments.
“There are signs of an overheating market, and certainly the rally can’t last for long,” said Wei Taiyuan, an investment manager at China Merchants Bank Co. in Shanghai. “Leverage in the bond market is much higher than at any time in history. If equities continue to perform well, or initial public offerings resume, the liquidity-fueled rally may come to an end.”
Among the potential triggers for a correction is state-owned steel trader Sinosteel Co.’s failure to make an interest payment originally due Tuesday on 2 billion yuan of bonds maturing in 2017. The company previously postponed a date at which investors could demand early repayment. Competition for funds is increasing as the best weekly rally in stocks since June has led to the biggest growth in margin debt for buying equities in half a year, which risks diverting money away from money markets.
Isn’t attaching oneself to communist casino just a ball?
