shadow finance: Margin trading pumped up China's stock market rally in 2015, and unwinding those leveraged bets amplified the crash, according to Global Times China. Now it looks like the 7 trillion bond market may be facing a similar, but perhaps bigger and murkier problem, stoked by shadow finance. First a US rate hike, then a squeeze on short-term lending that dried up fixed-income liquidity, and finally a brokerage scandal which fuelled fears about wobbly leverage underpinning China's bond market rally. Mid-sized firm Sealand Securities spotlighted those shadows when it aggravated a bond market sell-off in late December. The agreements in question are similar to formal bond repurchase agreement contracts, commonly known as repos. The broker prompted a panic when it said it would not honor contracts to buy back 2.4 billion of bonds from over 20 counterparties because the agreements were forged.
(news.financializer.com). As
reported in the news.
Tagged under shadow finance, rate hike topics.