March 2, 2018 / 8:52 AM / 21 days ago

China's money rates rise as maintains stability ahead of NPC

    SHANGHAI, March 2 (Reuters) - China's primary money rates crept up this week as the central
bank ensured ample liquidity amid month-end demand for cash, maintaining stability ahead of key
political meetings, but traders and analysts pointed to looming risks that could push rates
    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 2.9150
percent on Friday afternoon, 5.6 basis points higher than the previous week's closing average
    The the Shanghai Interbank Offered Rate (SHIBOR) for same tenor rose to 2.8970 percent
Friday, up 1.6 basis points from the previous week's closing rate.
    The one-day or overnight rate stood at 2.7682 percent and the 14-day repo stood at 3.7145
    The People's Bank of China (PBOC) injected a net 120 billion yuan into the money market this
week, on top of a net injection of 580 billion yuan a week earlier.
    However, market watchers said that while money market liquidity is ample at the moment, the
central bank's overall tightening bias remains. 
    Traders also pointed to expected high demand for cash at the end of the first quarter as
banks prepare for the PBOC's quarterly macro-prudential assessment (MPA).
    "Even if stability is being maintained, the relaxing of liquidity also has limits and there
is limited room for rates to continue to fall," Huachuang Securities analysts said in a note. 
    "Naturally, because of the 'two sessions' there will not be any clear tightening in the near
term, and rates are unlikely to rise much," they added, referring to the annual plenary sessions
of the National People's Congress and the National Committee of the Chinese People's Political
Consultative Conference, which begin on Monday.
    Chinese authorities have traditionally sought to avoid market volatility around major
political events.    
    But a possible rate hike by the U.S. Federal Reserve, which could prompt the PBOC to raise
open market rates more than expected, more restrictive regulation, the formal introduction of
rules governing the asset management industry, a squeeze on liquidity and quarter-end factors
could put pressure on the market, the analysts said.
 Key money rates at a glance:
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  rate (%)                                           
 Interbank repo market
 Overnight        2.7682      2.6906      +7.76                      0.00
 Seven-day        2.9150      2.8904      +2.46                      0.00
 14-day           3.7145      3.6379      +7.66                      0.00
 Shanghai stock exchange repo market
 Overnight        2.8000      3.0650      -26.50                     806,454.0
 Seven-day<CN7DR  3.3200      3.3850      -6.50                      55,492.00
 14-day           3.5000      3.5100      -1.00                      9,884.30
 PBOC Guidance Rates
 Overnight        2.7800      2.7000      +8.00                      
 Seven-day        3.3000      3.2000      +10.00                     
 14-day           3.7500      3.8000      -5.00                      
 Overnight        2.7730      2.6910      +8.20                      
 Seven-day        2.8970      2.8960      +0.10                      
 Three-month      4.7191      4.7154      +0.37                      
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
 2 yr IRS based on 1   CNABAD2YF=        0.0000              -1.5
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.8950               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 Andrew Galbraith
Editing by Jacqueline Wong)
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