February 24, 2017 / 4:15 AM / 5 months ago

China money rates climb on week, liquidity tightness easing

6 Min Read

    SHANGHAI, Feb 24 (Reuters) - China's primary money rates
surged to their highest since June 2015 over the week but edged
down on Friday, as liquidity tightness eased.
    The volume-weighted average rate of the benchmark seven-day
repo traded in the interbank market, considered a
key indicator of general liquidity, was 2.8012 percent at
midday, around six basis points lower than the previous day's
closing average rate, which was the highest in about 20 months. 
    For the week, the repo rate was 1.4 basis points higher than
the previous week's closing average.
    Pressure on liquidity conditions eased on Friday, with money
supply and demand balanced, traders said.
    "Market sentiment improved a lot today with prices coming
down ... as distribution of fiscal deposits has arrived," said a
trader at a Chinese bank in Shanghai.
    The Ministry of Finance traditionally steps up the
distribution of fiscal deposits to firms and individuals
benefitting from government programmes in the final week of a
quarter. The revenue usually lifts deposits in the banking
system, traders said.
    Several traders said they expected liquidity conditions to
remain "balanced" next week.
    In open market operations, the People's Bank of China
injected a net 155 billion yuan for the week compared with a net
drain of 150 billion yuan a week earlier.
    Market sources said the central bank injected funds through
targeted reverse repurchase agreements to some banks last week,
and the loans are set to mature this Thursday and Friday.
    Market participants said additional targeted operations were
aimed to make up the shortfall of funds after a large number of
maturing open market operations and temporary liquidity
facilities (TLF).
    Traders said they were not worried about the maturity of the
targeted repos and did not think the PBOC had rolled over the
open market operations as the money supply was sufficient.
    The TLF, introduced by the central bank in mid-January,
provided loans to big banks ahead of the long Lunar New Year
holiday, when demand for cash surges.
    The Shanghai Interbank Offered Rate (SHIBOR) for the
seven-day tenor rose to 2.7250 percent, 0.9 basis points higher
than the previous close. For the week, the rate was around six
basis points higher.

 Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.4167      2.5679      -15.12                     0.00
                                                                     
                                                                     
 Seven-day        2.8012      2.8636      -6.24                      0.00
                                                                     
                                                                     
 14-day           3.3564      3.5989      -24.25                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        4.0950      6.9150      -282.00                    201,980.1
                                                                     0
                                                                     
 Seven-day<CN7DR  3.5700      3.7550      -18.50                     46,677.50
 PO=SS>                                                              
 14-day           3.4500      3.3500      +10.00                     2,466.70
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.5500      2.5000      +5.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.3400      3.0300      +31.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           3.8500      4.5000      -65.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.4756      2.5271      -5.15                      
                                                                     
 Seven-day        2.7250      2.7160      +0.90                      
                                                                     
 Three-month      4.2829      4.2840      -0.11                      
                                                                     
 
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=        3.8400               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:

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by
Jacqueline Wong)
  

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