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China's money rates mixed, c.bank cash injections ease liquidity stress
May 19, 2017 / 8:18 AM / 3 months ago

China's money rates mixed, c.bank cash injections ease liquidity stress

    SHANGHAI, May 19 (Reuters) - China's primary money rates
were mixed for the week, as a central bank-led net cash
injection offset some of the liquidity pressure caused by
corporate tax payments.
    The volume-weighted average rate of the benchmark seven-day
repo traded in the interbank market, considered
the best indicator of general liquidity in China, was 2.8432
percent on Friday afternoon, nearly five basis points lower than
the previous week's closing average rate. 
    Traders said overall cash conditions were balanced with a
tightening bias, and monthly corporate tax payments sucked come
cash out of the market.
    They added that demand for loans with 14-day or longer
tenors was high as these would help banks get through the
month-end when cash demand peaks. Rising demand drove the 14-day
rate to 4.1509 percent on Friday afternoon,
almost 37 basis points higher than the previous week's close.
    This week, the People's Bank of China (PBOC) made a net
injection of 160 billion yuan ($23.21 billion) through its open
market operations. One week earlier, it drained a net 120
billion yuan. 
    The market interpreted this week's net injection - the
biggest in a month - as authorities ensuring the economy is not
choked  of funds while they continue to clamp down on financial
risks.
    The PBOC did not inject any cash through 28-day tenor in the
open market operations this week, following its claim that such
a tenor would be used when signs of pressure emerge in the
future. 
    "The central bank will mainly conduct reverse repos through
seven-day tenor in a period of time going forward, but will opt
to use other tenors when temporary and seasonal factors weigh on
the cash conditions," the PBOC said in its first quarter
monetary policy report, issued on May 12.
    It added that for medium-term lending facility
(MLF)operations, it will mainly inject funds with one-year tenor
while also using other tenors if needed to better meet mid- to
long-term liquidity demand at financial institutions.
    "The short-term cash injection through reverse repos
suggested that the central bank is still very strict on the
total amount of funds in the market," said a trader at a Chinese
bank in Shanghai.
    "The PBOC wants to strengthen its management of the total
liquidity."
    Separately, the central bank did not roll over a batch of
six-month tenure 179.5 billion yuan MLF loans that matured
Tuesday, as it provided 459 billion yuan via such loans on May
12, more than compensating for the MLF loans maturing this
month.
    A 230 billion yuan loan with six-month tenure matured on May
3.
    The Shanghai Interbank Offered Rate (SHIBOR) for the
seven-day tenor rose to 2.8800 percent, three basis points
higher than the previous week's close.
    
    Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.6483      2.7567      -10.84                     0.00
                                                                     
                                                                     
 Seven-day        2.8432      2.9145      -7.13                      0.00
                                                                     
                                                                     
 14-day           4.1509      3.8454      +30.55                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        6.6000      2.5900      +401.00                    970,695.5
                                                                     0
                                                                     
 Seven-day<CN7DR  3.9100      2.6000      +131.00                    108,209.6
 PO=SS>                                                              0
 14-day           4.0200      3.6950      +32.50                     12,811.10
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.6600      2.7600      -10.00                     
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.2000      3.4400      -24.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           4.5000      3.8500      +65.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.7150      2.7641      -4.91                      
                                                                     
 Seven-day        2.8800      2.8867      -0.67                      
                                                                     
 Three-month      4.4641      4.4439      +2.02                      
                                                                     
 
KEY INTEREST RATE SWAPS:
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
                                                 rate*
 2 yr IRS based on 1   CNABAD2YF=        0.0000              -1.5
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.9600               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 = 6.8921 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by Richard
Borsuk)
  

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