(Updates prices, adds trader comment on no TLF operations)
SHANGHAI, March 24 China's primary money rates
fell on Friday after surging to multi-year highs earlier in the
week as banks hoarded cash ahead of 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 closed at
2.8821 percent on Friday, down nearly 14 basis points (bps) on
The rate is considered a key indicator of general liquidity
It spiked to 9.5 percent on Tuesday, the highest level since
January 2014, but slipped around five bps for the week.
Three traders from different major state-owned banks said
liquidity was sufficient this week, and questioned reports that
hundreds of billions of yuan in liquidity had been provided by
central bank through its temporary liquidity facility (TLF) on
"There was no need to inject cash through the so-called TLF
... overall it was balanced," one of the traders said.
"Even though the central bank is taking the upcoming
macro-prudential assessments seriously, the banking system won't
face difficulty passing the coming week smoothly."
The central bank is expected to conduct its quarterly
assessment of the health of commercial banks next week.
The macro-prudential assessment, or MPA, will include
off-balance sheet wealth management products (WMPs) for the
first time, to give authorities a better sense of the risks in
the financial system. 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 market was calmer on Friday as cash conditions improved,
The central bank skipped open market operations on Friday,
but over the course of the week it injected a net 80 billion
yuan ($11.62 billion), its first weekly net injection in a
"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.
An 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
"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 2.30 bps to 2.7840 percent.
For the week, the rate was nearly six bps higher.
Key money rates at a glance:
Volume-wei Previous Change (bps) Volume
ghted day (%)
Interbank repo market
Overnight 2.5378 2.6911 -15.33 0.00
Seven-day 2.8821 3.0183 -13.62 0.00
14-day 3.4515 3.8165 -36.50 0.00
Shanghai stock exchange repo market
Overnight 5.8200 3.4250 +239.50 862,370.4
Seven-day<CN7DR 5.1000 3.9900 +111.00 89,953.90
14-day 4.3100 4.2000 +11.00 22,670.20
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:
($1 = 6.8834 Chinese yuan renminbi)
(Reporting by Winni Zhou and John Ruwitch; Editing by Simon
Cameron-Moore and Kim Coghill)