Crunch: China's Inverted Yield Curve, Deposit Wars Begin Again

ZH: "Historic" Chinese Yield Curve Inversion Flashes Recession
A month ago, China 5s10s curve inverted for the first time ever, flashing warning signs of an imminent recession (but technical, liquidity factors were offered as excuses for this shift in the belly of the curve). The curve then double-inverted (with 3s10s inverting) seemingly confirming fundamental fears. And now, China's yield curve is inverted from 1Y to 10Y for the second time in history.

...This is only the second time that the yield curve has inverted in data going back to 2006, with the first coming during a record cash crunch in June 2013.

As The Wall Street Journal recently wrote, such a “yield-curve inversion” defies normal market logic that bonds requiring a longer commitment should compensate investors with a higher return. It usually reflects investor pessimism about a country’s long-term growth and inflation prospects.
Speaking of the 2013 cash crunch, the deposit wars are back. Many WMPs offer more than 5$ interest and banks have been hiking deposit rates as the battle for capital heats up heading into quarter end.

iFeng: 银行年中资金争夺战打响 理财收益全线超5%
Financial revenue for the first time more than 5% across the board, deposit interest rates up 50%. In mid-year, a deposit war, seems to have started between the banks.

Since June 2, including state-owned banks, joint-stock banks, city commercial banks, including all kinds of banks, issued financial products, all of the expected rate of return of more than 5% of the product. Public information shows that some banks recently issued financial products, the expected earnings of more than 5%, accounting for more than 70%. At the same time, the deposit interest rate also appeared significant floating, many bank one-year deposit interest rates up to 50%, even the state line also rose more than 16%.

...he reason for this situation, and market liquidity is closely related. Several small and medium-sized banks in the financial market sector had to the first financial analysis, small joint-stock banks, city firms, previously issued a large number of the same industry financial management, and now the same industry financial focus to clean up the object, in order to fill the gap caused by the formation of the gap is too difficult Issued, only to enterprises, individual customers issued financial products. At the same time, commercial banks have to face the central bank MPA (macro review system) assessment, now has no time.

"Liquidity is indeed relatively tight, too dependent on the same industry debt bank is the case." A small and medium-sized bank chairman of the first financial, said the same industry in addition to the current financial difficulties, but also faced with redemption pressure. In order to reduce the proportion of interbank liabilities, accounting for high banks, is the size of the same industry financial pressure, the formation of pressure on liquidity.

The chairman of the board that in May this year, interbank deposit net financing amount is negative, on the one hand because the same industry financial capital costs rise, arbitrage space has been very small, or even upside down. On the other hand because of liquidity tension. Despite the rise in earnings, financial products sales are still unsatisfactory. Data show that in May this year, the same industry deposit net financing amount of -332.8 billion yuan.

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