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China main money rate up, market wary over regular reserve payment
July 2, 2012 / 6:11 AM / 5 years ago

China main money rate up, market wary over regular reserve payment

* Market will make regular payment on July 5
    * Next regular payment seen bigger than normal
    * But possible reverse repos limiting further rises

    By Chen Yixin and Gabriel Wildau
    SHANGHAI, July 2 (Reuters) - China's main short-term lending
rate inched up on Monday as market players remained cautious
ahead of a regular reserve requirement payment for banks on July
5 that is expected to be bigger than usual, dealers said.
    But the prospect of fund injections by the central bank this
week via reverse repos after it on Monday put in checks with
commercial banks about their demand for seven- and 14-day
reverse bond repurchase agreements, will likely limit gains.
    "We are still cautious over the payment and the amount won't
be small this time, but the reverse repos will help us a lot,"
said a dealer at a Chinese commercial bank in Shanghai.
    Banks must make regular payments on the 5th, 15th and 25th
in order to meet their RRRs, with the amount of the payment
adjusted in line with the current balance of deposits.
    The amount required on the 5th is likely to be greater than
normal as it will follow an increase in deposits at the
half-year end.
    The benchmark seven-day weighted-average bond repurchase
rate edged up to 4.1635 percent at midday from
Friday's close of 4.1388 percent.
    The overnight repo rate rose to 3.6194 percent
from 3.6099 percent, but tenors above 14-days fell over 10 basis
points on expectations that liquidity conditions may improve
after July 5, traders said.
    The market has recently suffered a liquidity crunch after
banks needed more money to meet half-year regulatory
requirements, such as loan-to-deposit ratios, and a large
initial public offering that took out 31 billion yuan ($4.9
billion) from the market this week.
    Traders said deposits recently have been rising sharply as
banks, seeking to enhance their half-year financial statements,
are succeeding in attracting more savers.
    
                                  Current  Prev close  Change
                                       (pct)           (bps)  
 7-day repo                        4.1635   4.1388     + 2.47
 7-day SHIBOR                      4.1567   4.1083     + 4.84
  Note: Repo rate is weighted average.
 
($1 = 6.3562 Chinese yuan)

 (Editing by Edwina Gibbs)

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