The market acted almost the same way as it did yesterday and there are a lot of comprehensive summaries out there so I won`t bother writing mine. What really caught my attention however was that the sell-off reached every asset class regardless how they used to seem like safe-havens – there was no real difference between German 10Y or Spanish 10Y. The only exception was probably the Swiss bond market but hey, where to if not to Switzerland?
Among a bunch of panic-like articles there was an interesting topic today: the rocketing of the 1 day Chinese interbank repo rate. As you can see on the chart below the interbank rate climbed to levels where it hasn`t been since, well almost ever. It`s worrisome because – as I can recall – almost the same thing happened in 2008. If you add the recently published overall credit ratio then the resemblance is uncanny. We have been hearing rumors about the Chinese credit bubble, the economic slowdowns and the artificially enhanced statistics and I`m far from a doom-preacher but if anything then this might become a trigger.
I think the underlying conditions had radically changed and the market behavior as well but I don`t know how long will the bearish sentiment go on. The next couple of days will be good ride.