Today Yuan Hibor rose 939 basis points on Monday to record high of 13.4%. It is indicative of borrowing short term Yuan in Hong Kong. Similar to well-known US Dollar counterpart, Libor, which is set in London, borrowing cost of offshore Yuan is submitted by banks in Hong Kong.
Any big impact in interest rate market is not that significant, since it's the Yuan based Hibor that has picked up. Most of the loans and mortgages generated in Hong Kong are linked to Hong Kong Dollar (HKD) Libor. Nevertheless, record high interest rates point to tightening in offshore - Yuan market.
According to latest data, offshore deposits of Renminbi has declined for fourth consecutive month and now stands at $130 billion. Due to weakness in CNY/CNH spread, which has hit more than 2% last week, traders have been borrowing offshore counterpart to pay off trade balance in onshore. Rising spread in onshore and offshore market has also led to short term carry trade, which might also have contributed to today's sharp spike in the borrowing cost.
Though People's Bank of China (PBoC) doesn't control the offshore rate, it might have intervened through state run banks to drain liquidity from Hong Kong in short term, thus raising the cost of carry trade and discouraging short selling Yuan.
The figure from Financial Times show, Hibor has been largely very volatile since 2014, in line with increased volatility in Dollar/Yuan exchange rate.
