Halister News

(Bloomberg) -- CNH rates are higher than Shibor and onshore interest-rate swaps because of increasing speculation that China may be more tolerant of RMB weakness after its inclusion into SDR basket, according to DBS Bank.

• Authorities may also be keeping offshore liquidity tight and keeping interest rates high to deter speculators, the analysts including Eugene Leow and Nathan Chow write in note today
  • CNH interest rates likely to stay elevated relative to CNY yields in coming few mos.
  • After hovering below the 6M Shibor (2.88%) in the four months ending August, the 6M CNH implied rate has now touched 3.85%
  • Similarly, spread widening has been taking place between the 5Y CNH CCS rate and the 5Y onshore swap rate over the past two weeks
• Market also underestimating Fed hike risks; stronger USD interest rates and currency would place more upward pressure on CNH and CNY interest rates
• NOTE: One-week CNH Hibor fell 139 bps to 4.92633% yesterday; still 322 bps higher so far this month
  • One-week Shibor little changed today at 2.3920%; up 2 bps this months