China's one-month money market rate dropped the most in eight months after the central bank added a record amount of funds to the financial system, helping ease demand for cash before a weeklong holiday starting Oct. 1.

The People's Bank of China injected a net 365 billion yuan ($57.9 billion) via reverse-repurchase operations and bill redemptions this week, the most since Bloomberg started compiling the data in 2008, compared with 101 billion yuan last week. The monetary authority offered 130 billion yuan of 28-day reverse repo agreements and 50 billion yuan of 14-day contracts today, according to a statement. China's financial markets will be shut next week for the National Day and mid-autumn holidays.

Eoin Treacy's view The TED spread (3-month LIBOR – 3-month Treasury Bill yields) has long been used as a barometer of risk in the financial sector. More recently it has offered an additional perspective on the lengths various central banks are willing to go in order to support the financial sector. The US version of this spread continues to trend lower and while the pace of the decline increased in September, a clear upward dynamic would be required to suggest an additional risk premium is being attached to the sector.

The Eurozone's version of the spread has declined by 90% since December and remains on a downward trajectory. At 14 basis points it offers a window on just how aggressive the ECB is prepared to be in its support for the financial sector. An alternative interpretation is that it has been forced into this action by the depth of the crisis facing the Eurozone.

The PBOC's infusion of liquidity, ahead of the weeklong Mid-Autumn holiday, set me to thinking about the Chinese financial sector. China 's version of the TED spread hit at least a five-year peak, above 300 basis points, in December at the height of the country's efforts to rein in the 2009 stimulus. Since then the spread has fallen to 100 basis points, where it has mostly paused since mid August. The lowest the spread has traded in quite some time was in early 2009, which reflected remarkably easy monetary policy. It is reasonable to suppose that those levels could be revisited should the PBOC deem it necessary.

The CSI300 Financial Index continues to outperform the wider market. The ratio bottomed in 2011 and has held a progression of higher reaction low since. A sustained move below 1.07 would be required to question medium-term scope for additional outperformance.

The CSI300 bounced from the 2200 area once more today, bolstering the base formation development hypothesis. A break in the progression of lower rally highs, currently near 2338, would confirm a near-term trend change.