While today's rabid explosion in the S&P500, coupled with a literal break in the NY Fed/Citadel market boosting algo which went haywire in the last moments of trading and pushed the S&P up to 2130 in milliseconds via Kevin Henry's preferred SPY ETF, may be the stuff of market manipulating legends, nothing compares to the far more berserk situation China finds itself in, where a 50% surge in the Shanghai Composite over the past few months - not on improving fundamentals but just the opposite, hopes of massive liquidity injections to halt China's economic hard landing - has found the PBOC scrambling to find a way to, politely, burst the stock market bubble without causing too much pain. This is because as reported overnight, China's seven-day repurchase rate, a gauge of interbank funding availability in the banking system, surged 139 basis points, to a 10-month high of 5.28% in Shanghai, the biggest since Jan. 20. The reason for the sudden cash crunch, according to Bloomberg, is that subscriptions for the biggest new share sales of the year lock up funds. Twelve initial public offerings from today through Dec. 25 will draw orders of as much as 3 trillion yuan ($483 billion), Shenyin & Wanguo Securities Co. estimated. In other words, the scramble to allocate capital into China's surest way of making money, IPOs, has led to a drying out of general liquidity in the entire market. This in turn forced the PBOC to intervene and inject short-term money loans to commercial lenders in order to prevent the kind of interbank liquidity lock up that emerged in China in June 2013 in the aftermath of the first Taper Tantrum (and which before all is said and done, will likely take place again) and which sent global capital markets around the globe reeling before China resumed its massive liquidity injections which are at the heart of China's debt-fuelled bubble in the first place. From Bloomberg: “The IPOs are affecting the market, leading to cautious sentiment with fewer institutions willing to lend,” said Li Haitao, a Shanghai-based analyst at China Guangfa Bank Co. “Quite a few traders found it very difficult to meet their funding needs yesterday.” Why? Because everyone wants to get rich quick so badly, they are risking collapsing the entire market. Lenders paid 4.65 percent for 60 billion yuan of three-month treasury deposits auctioned today by the PBOC, the most they’ve paid since January for such funds. The central bank also rolled over this week at least some of the 500 billion yuan of three-month loans granted to lenders in September, a government official said yesterday, declining to be identified as the details haven’t been made public. “Banks have to prepare for quarter-end regulatory checks, including loan-to-deposit requirements, and hoard cash to meet year-end demand,” said Wang Ming, chief operations officer at Shanghai Yaozhi Asset Management LLP, which oversees 2 billion yuan of fixed-income investments. “With all these factors affecting the market, it’s no surprise it’s suffering more than during previous IPOs.” The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose five basis points to 3.38 percent, data compiled by Bloomberg show. The yield on China’s sovereign bonds due September 2024 fell two basis points to 3.78 percent, according to data from the National Interbank Funding Center. It’s increased 27 basis points this month. The PBOC is expected to cut lenders’ reserve requirements before the Lunar New Year holiday in February to top up the money supply as the prospect of U.S. interest-rate increases draws cash from China, according to Ding Shuang, senior China Economist at Citigroup Inc. in Hong Kong. And since the Chinese stock market is surging ever higher on momentum-driven euphoria, China which wants to if not burst its bubble than certainly tame it as it is already having adverse impacts on cross-asset classes, the last thing regulators want to do is risk a full blown slam in equities, which are now so far above their fair value, a Chinese market correction correction could have dramatic consequences on all other aspects of China's bubble economy. They better decide quick just how they will do this, becauase as Bloomberg also reported moments ago: CHINA 7-DAY REPO RATE TOUCHES 5.81%, HIGHEST SINCE JAN. Ironic, and very much reflexive: with all the "money on the sidelines" is being soaked up in the stock market, there is nothing left to keep the rest of the facade operating efficiently, which ultimately assures a stock market crash. Perhaps even in a time of pervasive central-planning, a Princeton economist can only pull the rubber band so far before it finally snaps.