>>60847

tyb

>>60823 pb

SAM471 USAF C-40B on descent for Guatemala City from JBA departure earlier

>>60899

dat was EPIC

owned it all da way too

This from the Vietnam trip via Sarah on AF1

The Mysterious $85 Billion Surge In China's FX Reverse Repo

A mysterious surge in dollar lending by Chinese banks in an arcane corner of the financial market is leading some investors to wonder whether it’s somehow related to the “stealth intervention” by the PBOC to slow yuan appreciation.

For years, Chinese banks had little use for foreign-currency reverse repo, which is effectively collateralized lending. That has dramatically changed since the pandemic. Banks’ FX reverse repos surged to a record $87 billion in April, from less than $2 billion a year earlier. “Historically, Chinese banks FX assets and liabilities have consisted almost exclusively of loans and deposits,” Alex Etra, a senior strategist at Exante Data who previously worked at the New York Fed, wrote in a blog post. “But the surge in interbank lending (via reverse repo) in recent quarters is quite stark.”

It’s unclear why there’s this sudden surge. But what we do know is that:

1. There’s a lot of dollar inflows to China through trade and portfolio investment over the past year.

2. A lot of these flows have been absorbed by Chinese banks, while the PBOC shows few signs of intervention on its balance sheet. Without commercial banks’ activities, the yuan would have appreciated more.

3. As a result, commercial banks have taken more currency risks. For example, Bank of China, one of the largest state lenders, used to be a net borrower in the FX swap market, but has become a net lender, according to Etra. The bank’s net open foreign-currency position on and off-balance sheet rose to $19 billion last year, the highest level since 2014.

It’s debatable whether Chinese banks are accumulating dollar assets and taking on more currency risks for commercial reasons, or if they are acting on behalf of the central bank to engage in “stealth intervention.” But as Etra noted, so long as China runs a current account surplus, and global investors continue to purchase more Chinese assets, “someone somewhere in China is going to have plenty of dollars to lend.”

Janet Yellen’s Treasury Department has been keen to learn more about activities by Chinese state banks in the currency market. The curious surge in dollar lending in the derivative market could be a good starting point.

https://www.zerohedge.com/markets/mysterious-85-billion-surge-chinas-fx-reverse-repo

China Bond-Selloff Fears Grow as Liquidity Begins to Tighten

China’s sovereign bonds have defied expectations for a selloff all year but their day of reckoning may be getting closer.

The amount of cash in the banking system has been shrinking based on rising short-term interest rates, while local government debt sales are set to double this week, hoovering up more funds. In another warning sign, the overnight interbank borrowing rate has risen to the highest level since February. “Investors should be more cautious on the Chinese bond market in June,” said Yin Ruizhe, a fixed-income analyst at China Merchants Securities Co. in Shenzhen. “Local government bond issuance will make the market more sensitive to capital needs, especially as liquidity in the banking system has already tightened.”

That’s all changing this month, with the unusual increase in overnight interbank repurchase rate to the highest since February, defying the established pattern of weakness at the start of the month. At the same time, municipal authorities are expected to double debt issuance this week to nearly 295 billion yuan ($46.1 billion) from the previous week. The overnight interbank borrowing rate rose to 2.3% Monday, and was at one stage six basis points higher than the benchmark seven-day gauge, implying the most inverted funding curve since February. The more expensive short-term liquidity reduces the attractiveness of borrowing cash to invest in government bonds. The strongest headwind though appears to be the scaling up in local government debt issuance.

There’s a decent possibility that monthly net government bond financing may rise about 1 trillion yuan for some months ahead, Nomura International economists led by Ting Lu in Hong Kong wrote in a research note. Only 26% of net financing has been completed in the first five months of 2021 and Beijing is likely to require local governments to fulfill most of their quota by the end October, they said.

https://www.bnnbloomberg.ca/china-bond-selloff-fears-grow-as-liquidity-begins-to-tighten-1.1613886