SHANGHAI, March 24 China's primary money rates
fell on Friday after surging to multiple-year highs earlier in
the week, driven up by a cash squeeze on worries over central
bank-led liquidity checks at the end of this month.
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 2.8076 percent
by midday, around 21 basis points lower than the previous day's
closing average rate. For the week, the rate was down 12 basis
The seven-day funding cost spiked to a high of 9.5 percent
intraday on Tuesday, the highest level since January 2014.
The market was calmer on Friday, cash conditions became
balanced, but there was still with some slight tightening bias,
A trader at a Chinese bank in Shanghai said cash conditions
could tighten again next week when the central bank's quarterly
macro-prudential assessment (MPA) will be taken place.
The People's Bank of China's MPA assessment for the current
quarter will include off-balance sheet wealth management
products (WMPs) for the first time. The assessment is due at the
end of March.
Market participants widely expect the tightened supervision
associated with the MPA assessment to weigh on the money market.
The central bank skipped open market operations on Friday.
For the week, the PBOC net injected 80 billion yuan, the first
weekly net injection in a month.
"Given fiscal expenditure strengthening at the end of the
month, liquidity in the banking system is currently staying at a
relatively high level," the PBOC said in a statement on its
website on Friday.
Imbalance of money supply and demand among big lenders,
their smaller peers and non-banking financial institutions
triggered the most recent cash squeeze.
Some smaller institutions, including some rural commercial
banks failed to meet repayments on debt on Monday, two traders
"Looking forward, more technical defaults are possible if
banks have trouble accessing liquidity when fears of
counterparty risk loom," DBS group research wrote in a note.
The Shanghai Interbank Offered Rate (SHIBOR) for the
seven-day tenor fell to 2.7840 percent, 2.30 basis
points lower than the previous close. For the week, the rate was
nearly six basis points higher.
Key money rates at a glance:
Volume-wei Previous Change (bps) Volume
ghted day (%)
Interbank repo market
Overnight 2.5484 2.6911 -14.27 0.00
Seven-day 2.8076 3.0183 -21.07 0.00
14-day 3.1394 3.8165 -67.71 0.00
Shanghai stock exchange repo market
Overnight 4.0300 3.4250 +60.50 212,371.1
Seven-day<CN7DR 5.0100 3.9900 +102.00 49,477.80
14-day 4.3400 4.2000 +14.00 10,304.10
PBOC Guidance Rates
Overnight 2.5500 2.7000 -15.00
Seven-day 3.2000 3.4400 -24.00
14-day 5.0000 4.1000 +90.00
SHANGHAI INTERBANK OFFERED RATE
Overnight 2.6040 2.6570 -5.30
Seven-day 2.7840 2.8070 -2.30
Three-month 4.4516 4.4396 +1.20
KEY INTEREST RATE SWAPS:
Instrument RIC Rate Spread vs 1 yr
2 yr IRS based on 1 CNABAD2YF= 0.0000 0
5 yr 7-day repo swap CNYQB7R5Y= 3.8600 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:
Reports on central bank open market operations:
New Chinese debt issues:
Prices for central bank bills, treasury bonds and sovereign
Overview of China financial market data:
(Editing by Simon Cameron-Moore)