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China money rates fall as seasonal demand for cash ebbs
March 3, 2017 / 4:05 AM / 7 months ago

China money rates fall as seasonal demand for cash ebbs

    SHANGHAI, March 3 (Reuters) - China's primary money rates
fell for the week on Friday, despite a central bank-led net
drain, following decreasing cash demand after the month-end
peak.
    The volume-weighted average rate of the benchmark seven-day
repo traded in the interbank market, considered a
key indicator of general liquidity in China, was 2.3965 percent,
around 47 basis points lower than the previous week's closing
average rate. 
    Last Friday's closing average was the highest since June
2015
    Traders said pressure on liquidity conditions triggered by
seasonal factors, including squaring off of monthly regulatory
payments by banks and corporates, has faded this week. That
explains why the central bank withdrew funds from the market.
    "The central bank's liquidity management is very accurate
now. Once it sees too much funds flowing in the market, it takes
them away," said a trader at a Chinese bank in Shanghai.
    The People's Bank of China (PBOC) drained a net 280 billion
yuan ($40.59 billion) from the financial system for the week,
compared with a net injection of 155 billion yuan a week
earlier.
    The central bank has net drained cash through reverse
repurchase agreements on a daily basis for seven straight
trading days. 
    CITIC Securities said there is uncertainty on broad
regulatory policy in China, highlighting broad analysts'
concerns about Beijing's move to defuse bubble risks from years
of explosive growth in debt. 
     "Overall, there is uncertainty in regulatory policy over
the long term, but liquidity in the short term is ample," CITIC
wrote in client note this week.
    Investors are keeping a close eye on key economic targets
set to be announced at the opening of the annual parliament
meeting on March 5. 
    Indeed, China's leaders are expected to emphasize reforms
over policy stimulus as their priority amid concerns over
financial instability in the world's second-largest economy.

    China plans to target broad money supply growth of around 12
percent in 2017, slightly slower than last year's goal, policy
sources told Reuters, signaling a bid to contain debt risks
while keeping growth on track.
    The medium-term lending facility, or MLF, rolled out by the
central bank, a batch of 194 billion yuan worth of loans are due
to mature next Wednesday.
    The Shanghai Interbank Offered Rate (SHIBOR) for the
seven-day tenor fell to 2.6590 percent, around seven basis
points lower than the previous week's close.
    FACTBOX-What to expect from China's annual meeting of
parliament 
    
    

 Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.2903      2.4277      -13.74                     0.00
                                                                     
                                                                     
 Seven-day        2.3965      2.8086      -41.21                     0.00
                                                                     
                                                                     
 14-day           2.9407      3.5149      -57.42                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        2.8100      2.8200      -1.00                      166,262.9
                                                                     0
                                                                     
 Seven-day<CN7DR  2.9000      2.7000      +20.00                     41,426.00
 PO=SS>                                                              
 14-day           2.8700      2.9200      -5.00                      5,569.10
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.4500      2.5000      -5.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.1000      3.2400      -14.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           3.6500      4.0000      -35.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.3690      2.4611      -9.21                      
                                                                     
 Seven-day        2.6590      2.7320      -7.30                      
                                                                     
 Three-month      4.2905      4.2904      +0.01                      
                                                                     
 
KEY INTEREST RATE SWAPS:
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
                                                 rate*
 2 yr IRS based on 1   CNABAD2YF=        0.0000                 0
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.9300               n/a
 
*This spread can be seen as a proxy for forward-looking market
expectations of an interest rate cut or rise
               
China FX and money market guide: 
 China debt market guide:
 SHIBOR rates:
 Reports on central bank open market operations:
 New Chinese debt issues:
 Prices for central bank bills, treasury bonds and sovereign
bonds:
 Overview of China financial market data:

($1 = 6.8986 Chinese yuan )

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by Shri
Navaratnam)
  

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