Liquidity squeeze set to be biggest risk for 2017

China's money-market liquidity squeeze is about to get worse.

The benchmark seven-day repurchase rate will average 2.65 percent in the first quarter, up from 2.46 percent in the current period and the highest since the start of 2015, according to the median estimate in a Bloomberg News survey of 24 bond traders, investors and analysts.

More than half of the respondents are expecting a record sell-off in China's $7.9 trillion debt market to last until at least the end of March, with the government's deleveraging push and tighter monetary conditions looming as the biggest risks.