April 9, 2013 / 5:33 AM / 4 years ago

China money rates stable, ignore low CPI, mild PBOC operations

* Benchmark 7-day money rate almost unchanged at 3.28 pct
    * Possible first sign of less capital inflow - traders
    * China March CPI at 2.1 pct y/y, lower than expected
    * PBOC conducts net injection of money in open market

    By Lu Jianxin and Pete Sweeney
    SHANGHAI, April 9 (Reuters) - China's money rates stayed
stable on Monday, brushing aside the country's
milder-than-expected March inflation and the central bank's
modest open market operations, which traders said might signal
that heavy capital inflows have been slowing.
    The benchmark seven-day bond repurchase rate 
remained little changed at 3.28 percent by midday, while the
overnight rate dropped 3 bps to 2.15 percent and 
the 14-day rate slipped 1 bp to 3.08 percent.
    China's annual consumer inflation eased to 2.1 percent in
March from February's 3.2 percent, lower than expectations of
2.4 percent, while producer price deflation deepened, data
showed on Tuesday, leaving policymakers room to  keep monetary
conditions easy and nurture a nascent recovery. 
    In another development, the People's Bank of China (PBOC)
drained 30 billion yuan ($4.84 billion) from the money markets
through 28-day repos in its regular open market operations on
Tuesday. 
    But with a combined 41 billion yuan in central bank repos
and bills maturing on Tuesday, the central bank will actually
end up the day injecting 11 billion yuan into the markets,
according to Reuters calculations.
    "The seven-day repo rate has remained above 3 percent since
late March despite mild PBOC operations, that could be the first
sign that large-scale capital inflows into China this year are
slowing," said a trader at a Chinese state-run bank in Beijing.
    Still, traders were confident that money conditions will
remain relatively comfortable in the near term, propelled in
part by central bank bills due to mature this month and be
injected into the market.
    A total of 105 billion yuan will mature in April, according
to Reuters calculations.
    The PBOC has been mopping up funds via its open market
operations for most of the year due to an abundance of liquidity
in the money markets, driven mainly by unexpected heavy capital
inflows since late last year.
    The central bank, together with Chinese commercial banks,
purchased a record-high net 683.7 billion yuan equivalent in
foreign exchange in January. Though imprecise, these purchases
serve as a rough proxy for capital inflows into China. 
    In the same month, the PBOC's foreign exchange assets rose
by 351.51 billion yuan, according to central bank data.
    Taken together, these figures indicate that the PBOC was
responsible for more than half of net forex purchases by Chinese
banks in January. That shows how aggressive the PBOC was about
mopping up excess dollars from the interbank market to rein in
the yuan while injecting base money into the banking system.
    In order to hold the Chinese currency steady, the
PBOC has had to intervene to mop up large quantity of foreign
currencies that flows into China. It then has to sterilize - via
open market operations - excessive yuan liquidity being pumped
into the money markets.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.2769     3.2838     - 0.69
7-day SHIBOR           3.2880     3.2790     + 0.90 
 Note: Repo rate is weighted average.
    
        >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
    
    MARKET DRIVERS
    - Markets spin on liquidity switches 
    - Non-bank financing to rise in 2013 
    - Monetary policy to be neutral in 2013 
    
    DATA POINTS
    - External liquidity tracker: Open market operations and
fiscal deposits are the main sources of liquidity in recent
months GRAPHIC: r.reuters.com/das95t
    - Impact of maturing central bank bills and repos GRAPHIC: r.reuters.com/kas95t
    - China's interest-rate swap curve has steepened GRAPHIC: r.reuters.com/has95t
    - China's government bond yield curve has steepened GRAPHIC:
r.reuters.com/jas95t
    - China corporate bond spreads have narrowed slightly 
GRAPHIC: r.reuters.com/mas95t
    - Hot money tracker: Hot outflows may be reducing liquidity,
but the impact is small GRAPHIC: r.reuters.com/was95t
    
   >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>   

 (Editing by Richard Borsuk)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below