March Cash Crunch All But Guaranteed

China PBOC Offers CNY100 Billion 14-Day Repos Tuesday -Traders
The PBOC will probably drain more liquidity this week than it did last week, when it drained only 108 billion yuan for the whole week. It offered 48 billion yuan of 14-day repos last Tuesday.

Most Asian Shares Fall as China Property Concerns Weigh
The Shanghai Composite lost another 2.1% to end at 2034.62 and Hong Kong's Hang Seng Index lost 0.3% to 22317.20 after the People's Bank of China offered 100 billion yuan ($16 billion) of 14-day repurchase agreements in Tuesday's open-market operation, which in effect drained money out of the system.

In June, September and December there were quarter end cash crunches fueled by banks rushing to window dress for the regulators. The cash crunch in September was not reported as a cash crunch because the PBOC intervened ahead of a move higher in interest rates. In June and December, they only intervened after the cash crunch raised interest rates.

Now the PBOC is draining interest rates. Trusts are coming due. Banks are tightening lending policies to developers who make up a huge proportion of trust borrowers. Banks are fighting with a surge of online money market funds winning over depositors. Meanwhile, the PBOC is depreciating the yuan in order to halt hot money flows (this is the wisdom of the crowd, we still don't know for sure), which leads to less foreign currency flowing into China, which leads to fewer renminbi created. The situation is shaping up to be much worse than in any of the prior three quarter ends.

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