If you are still in the dreamland of low interest rate environment, this should be a wake up call. Globally, the monetary policies are tightening and China has experienced its liquidity squeeze.

On June 20, the 1-day SHIBOR surged 578.4 bps to a record high of 13.44%.


For those who are not familiar with SHIBOR, it is like LIBOR in London and SIBOR in Singapore. SHIBOR refers to the Shanghai Interbank Offered Rate. It is a daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Shanghai wholesale (or “interbank”) money market.

There are eight Shibor rates, with maturities ranging from overnight to a year. They are calculated from rates quoted by 16 banks, eliminating the two highest and the two lowest rates, and then averaging the remaining 12.

To put the figures in perspective, look at the historical Libor chart below. Libor shot up to be more than 7% during dot com bubble and more than 5% during Lehman crisis. Though Shibor was always understandably higher than Libor, it is the magnitude and speed of the increase make the market worried.

In time of crisis, the rate does not rise, it levitates!


About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

  • I think interest rates mostly increase when the economy
    recovers and interest rates go down when the economy is in
    recession. Low interest rates will stimulate growth and cause
    inflation while high interest rates will limit growth and lower
    inflation. If the govt is stupid to increase interest rates during
    periods of slow growth then it will cause the economy to crash even
    further. I don’t think the rise in interest rates globally now is
    due to a crash coming however it is due to an anticipation of an
    economic recovery. The markets will be affected temporary only but
    will regain its form after awhile.

  • Will appreciate your advise on whether interest rate in Singapore will mirror that and how it will affect the housing market?

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