400 Basis Points Spread: Hedge Funds Bet on China's Interest Rate Hike
"Is a rate hike coming?" On the afternoon of the 25th, such rumors suddenly arose in the market and began to spread vigorously. This scenario has repeatedly occurred since May.
What is disrupting domestic market expectations? Who is continuously betting on rising interest rates?
Since May, there has been a sudden significant disparity in quotes between domestic and international RMB interest rate swap markets. From one perspective, this may illustrate the issue. Starting immediately, these two markets, which were previously synchronized and price-coordinated, began to move inversely, showing a huge gap.
Analyst Shi Lei from the Research Team of Bank of China's Global Financial Markets Department told reporters: "This is mainly because the vast scale of international hedge funds are betting that RMB capital prices will continue to rise. As a result, they have heavily invested in positions in the offshore RMB non-deliverable interest rate swap market, purchasing fixed rates."
Surprisingly, it seems they might have bet in the right direction this time.
The sudden fluctuation in the offshore market