January 12, 2018 / 5:32 AM / 2 months ago

China's money rates rise as quarterly tax-time approaches

    SHANGHAI, Jan 12 (Reuters) - China's primary money rates
ended the week higher despite a net injection of liquidity this
week as demand for cash rises ahead of a period when quarterly
tax payments are due.
    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 2.8702
percent on Friday. That's 18.4 basis points higher than the
previous week's closing average of 2.6860 percent.
    The Shanghai Interbank Offered Rate (SHIBOR) for the same
tenor rose to 2.8640 percent, 11.9 basis points higher than the
previous week's close at 2.745 percent.
    The one-day or overnight rate stood at 2.8226 percent, and
the 14-day repo stood at 3.9816 percent.
    On Friday, the People's Bank of China (PBOC) injected 270
billion yuan ($41.66 billion) into money markets through
seven-day and 14-day reverse bond repurchase agreements.
    Net injections through open market operations this week
totalled 40 billion yuan, compared with a net drain of 510
billion yuan the previous week.
    Citing what it called "appropriate" liquidity levels in the
banking system, the PBOC skipped open market operations for 12
consecutive trading days through Jan. 10. But analysts said that
rising demand for cash was leading to increased tightness in the
    "As we step into the tax payment period, liquidity
conditions may turn from relaxed to tight," CIB Research
analysts said in a note, adding that they expect conditions to
remain tight into next week.
    Financial institutions are set to make October-December tax
payments, required reserve payments and other regulatory
payments in mid-January. 
    Adding to the drain on liquidity, two batches of medium-term
lending facility (MLF) loans worth a total of 289.5 billion yuan
mature in January. The first batch, worth 182.5 billion yuan, is
due Jan. 13. 
    During the week that starts on Jan. 15, maturing reverse
bond repurchase agreements will drain 470 billion yuan.

 Key money rates at a glance:
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  rate (%)                                           
 Interbank repo market
 Overnight        2.8226      2.8396      -1.70                      0.00
 Seven-day        2.8702      2.9376      -6.74                      0.00
 14-day           3.9816      3.8536      +12.80                     0.00
 Shanghai stock exchange repo market
 Overnight        2.9700      2.3750      +59.50                     175,739.2
 Seven-day<CN7DR  3.3200      3.3650      -4.50                      33,434.10
 14-day           3.8100      3.7400      +7.00                      4,984.70
 PBOC Guidance Rates
 Overnight        2.8500      2.8500      +0.00                      
 Seven-day        3.4500      3.4900      -4.00                      
 14-day           4.0000      3.9000      +10.00                     
 Overnight        2.8300      2.8320      -0.20                      
 Seven-day        2.8640      2.8320      +3.20                      
 Three-month      4.6791      4.6701      +0.90                      
 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=        3.9900               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
 Overview of China financial market data:

($1 = 6.4815 Chinese yuan)

 (Reporting by Andrew Galbraith; Editing by Richard Borsuk)
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