China Regulators Investigate Record-Breaking 50% Liquidity Stress

Chinese financial regulators are investigating a liquidity crunch at the end of October that caused short-term money rates to surge to as high as 50%. The China Foreign Exchange Trade System (CFETS) has asked institutions to explain why they borrowed at such high rates. The surge in rates was attributed to a month-end scramble for cash and a flood of government bond sales, which created unusual liquidity stress. Some analysts believe that authorities may have wanted to keep yuan liquidity tight to prevent the currency from sliding against the US dollar.