By Sober Look
The sharp jump in China’s short-term rates has been nearly reversed. Repo rates are approaching their longer-term averages, with the PBoC coming to its senses and addressing the liquidity squeeze.
However as the short-term rates came down, so have rates at longer maturities. The full interest rate swap curve has shifted lower but remains inverted (see post). The chart below compares today’s curve with the one three weeks ago. The market continues to price in some further slowdown in China’s economic growth.