China's central bank stepped in to urge major commercial banks to lend to non-bank financial institutions on Thursday afternoon after many suspended interbank operations amid tight liquidity conditions, Caixin reported on late on Thursday.Remember that mortgage lending was more than 100 percent of bank lending back in July. The total lending to the household sector was 85 percent in November.
Caixin: China Bond Markets Roiled by Rumors, Fed Rate Increase
Several mutual funds in China suffered huge selloffs amid a bond market crash Thursday, and the funds scrambled for money as most banks tightened lending to non-bank financial institutions.The takeaway isn't that it was a only a rumor, it's that a single rumor halted the bond market and the lending market.
At 4:45 p.m. on Thursday, 15 minutes before the central bank's interbank high-volume payment clearing system closed, several fund management firms were still looking high and low for cash to pay panicked investors who were selling their money market funds.
...But the immediate cause of Thursday's crash was a rumor that one securities firm defaulted on 500 million yuan in bond payments — a rumor the company denied.
Caixin learned from several bankers that many commercial lenders, including the four largest state-owned banks, suspended granting loans on Thursday to non-bank financial institutions like securities and fund-management firms.