Some Chinese institutions have to borrow at 50% rate as liquidity squeezed

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– Overnight borrowing costs for some Chinese financial institutions jumped to as high as 50% on Tuesday, as a month-end scramble for cash squeezed liquidity and stressed money markets.

In addition to seasonal factors, the cash shortage was caused by an upcoming flood of government bond issuance, and traders also pointed to market fears of default by cash-strapped institutions.

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The highest overnight rate for pledged repo – a short-term financing business – hit 50% on Tuesday, according to official interbank data, although the average rate remains modest at roughly 3.6%.

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