LIBOR Vs. SHIBOR

As an analogy on this post, we can do the same analysis in China. The key is that SHIBOR affects Chinese adjustable mortgage rates.

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.

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.

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.

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

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