,
5 tweets,
2 min read
Read on Twitter
new developments in China's repo markets since mid June wsj.com/articles/china… h/t @adam_tooze
some doubts aside (article compares flows in Chinese repos to stocks in US repos, no transfer of title to collateral in pledged repos, not easy to firesale), article suggests China is closer to repo liquidity crisis than it was in June 2013, last time repo rates spiked
1. June typically comes w funding pressures, but now we know haircuts raised massively for overnight repos & flight to safe collateral. Makings of a run on repo, even with repo market framework that is less fragile than US type repos. 
2. Chinese regulators have structurally designed repo/bond markets to accommodate fluctuations in trading without firesales.
This, involves moral suasion/leaning on banks to preserve funding.
This, involves moral suasion/leaning on banks to preserve funding.
PBOC also expanded collateral framework without marking collateral to market/calling margin - learning valuable lesson from ECB mistakes in 2009-2012.
PBOC is only large central bank that still has proper, countercylical lender of last resort framework.
PBOC is only large central bank that still has proper, countercylical lender of last resort framework.
