The 7-day repo fixing (the average of morning repo transactions) spiked overnight, prompting a Bloomberg story claiming that a squeeze on funding for non-bank financial institutions was at work. This doesn’t quite make sense, because the 1-day repo fixing was subdued, as shown in the chart. A squeeze on shadow banks borrowing in the repo market would affect overnight rates as well as the 7-day rate. A simpler and likelier explanation is that banks are borrowing heavily to meet quarter-end needs. Other measures of money market stress remain low. The cost of hedging offshore RMB remains at a one-year low. The implied volatility of 1-month options on the USD-CNH exchange rate traded overnight at 3.75%, against a one-year average of 4.8% and a November-December level of over 6%. Nothing to see here, folks.