August 11, 2017 / 9:06 AM / a month ago

China's money rates slightly up on central bank-led cash drain

    SHANGHAI, Aug 11 (Reuters) - China's primary money rates
were slightly up for the week after the central bank drained
some cash out of the market, though liquidity stress seen in
June has abated and helped check any sharp moves. 
     Traders said market sentiment was unaffected by the small
cash drain through open market operations, and they were able to
square their books.
    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, closed at
2.8373 percent on Friday, around 5 basis points above the
previous week's closing average rate at 2.7879 percent.
    For the week, the People's Bank of China drained a net 30
billion yuan ($4.50 billion) from the market via its reverse
bond repurchase agreements, compared with a net drain of 40
billion yuan a week earlier.
    One trader at a Chinese bank said the central bank's
relatively neutral bias in recent open market operations has
relieved the market, as it suggested the PBOC would inject some
fresh funds if signs of liquidity stress emerge.    
    Two batches of medium-term lending facility (MLF) loans are
due to mature next Tuesday, with a total volume of 287.5 billion
yuan, and most market players expect the PBOC to roll over the
loans.
    "The central bank's monetary policy will be more focused on
not getting so tight that it would hurt financial markets and
the real economy, while it won't be too loose, as that would
allow institutions to re-leverage," said Ming Ming, an analyst
at CITIC Securities.
    
    Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.7633      2.7885      -2.52                      0.00
                                                                     
                                                                     
 Seven-day        2.8373      2.9031      -6.58                      0.00
                                                                     
                                                                     
 14-day           3.6094      3.6661      -5.67                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        3.0100      3.0550      -4.50                      851,068.3
                                                                     0
                                                                     
 Seven-day<CN7DR  3.3250      3.2900      +3.50                      66,702.10
 PO=SS>                                                              
 14-day           3.4800      3.4600      +2.00                      6,278.60
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.8000      2.8000      +0.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.2000      3.4000      -20.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           3.6000      3.7000      -10.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.7900      2.7970      -0.70                      
                                                                     
 Seven-day        2.8725      2.8767      -0.42                      
                                                                     
 Three-month      4.2979      4.2867      +1.12                      
                                                                     
 
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=        3.7200               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 = 6.6668 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by Lisa
Twaronite)
  

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