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Katchum
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Albert Sung is the author of Correlation Economics, monitoring breaking economic news on a day to day basis. He started investing in 2008 because of the economic crisis and holds a masters degree in chemical engineering. Previously, he worked several years as a process engineer at Ashland, a... More
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Correlation Economics
  • LIBOR VS SHIBOR 0 comments
    Jun 21, 2013 2:09 PM

    As an analogy on this post, we can do the same analysis in China.

    Following site gives us the Shanghai LIBOR rates, namely: SHIBOR.

    http://www.shibor.org/shibor/web/ShiborJPG_e.jsp

    As you can see, we had a pretty big spike in SHIBOR (Chart 1), which also means a surge in China interest rates/funds rate.

    (click to enlarge)
    Chart 1: SHIBOR

    As you know a rise in interest rates means a rise in bond yields too, because there is this correlation between the funds rate, the mortgage rates and the bond yields.

    (click to enlarge)
    Chart 2: 10 year China Bonds

    As SHIBOR increases, so does the Chinese funds rate increase together with rising adjustable mortgage rates. And that has negative implications on the Chinese real estate market as you can see below.

    (click to enlarge)

    So watching SHIBOR is a must, if you are invested in Chinese government bonds and Chinese real estate.

    If SHIBOR goes up, bonds and real estate go down.

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