February 23, 2018 / 6:33 AM / 6 months ago

China's money rates steady on c.bank's liquidity support after holiday

    SHANGHAI, Feb 23 (Reuters) - China's money rates were stable
in the Lunar New Year holiday-shortened week, as liquidity
conditions loosened following a generous cash injection by the
central bank.
    The volume-weighted average rate of the benchmark seven-day
repo traded in the interbank market, considered
the best indicator of general liquidity, was 2.8406 percent on
Friday afternoon, around 1 basis point higher than the previous
week's closing average rate of 2.8279 percent on Feb. 14, the
last trading day before the week-long holiday.
    Financial markets resumed trading on Thursday after China's
biggest holiday of the year, but many market participants were
still on holiday, traders said.
    Few signs of liquidity stress were seen in the money market
this week, thanks largely to liquidity support by the central
bank, and the funds would allow financial institutions to
smoothly head into the month-end, traders said. 
    The People's Bank of China (PBOC) resumed fund injection
through its open market operations after the long holiday
following a 16-trading-day hiatus of skipping reverse repos. The
PBOC injected a total of 580 billion yuan ($91.47 billion) on a
net basis on Thursday and Friday to keep liquidity ample in the
financial markets post-holiday.
    The reverse repos conducted on both days were through 7-day
tenor, and longer tenors including 28-day and 63-day.
    The PBOC said in a statement on its website that the cash
injection was to counter factors from tax payments and reserve
payments at financial institutions.
    No reverse repos are set to mature this week. A batch of
one-year, medium-term lending facility (MLF) loans worth 243.5
billion yuan which expired on Feb. 15, was settled on Thursday.
    The central bank injected 393 billion yuan into the
financial system via one-year MLF on Feb. 12.
    Economists at Nomura said in a note on Thursday that the
resumption of open market operations was to "send a signal of
its bias to keep liquidity broadly stable". And the longer tenor
also served to "limit future money market volatility". 
    Ming Ming, head of fixed income research at CITIC
Securities, said the large cash injection was also aimed at
keeping liquidity stable during China's annual "two sessions" in
early March. 
    The "two sessions" refer to the annual plenary sessions of
the National People's Congress and the National Committee of the
Chinese People's Political Consultative Conference.
    Traditionally, Chinese authorities have sought to push for
stability as any major volatility in the economy would be
unwelcome ahead of or during major political events.
    
Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.5642      2.6066      -4.24                      0.00
                                                                     
                                                                     
 Seven-day        2.8406      2.8897      -4.91                      0.00
                                                                     
                                                                     
 14-day           3.8452      3.7894      +5.58                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        3.9600      3.9100      +5.00                      181,756.7
                                                                     0
                                                                     
 Seven-day<CN7DR  4.0050      4.0350      -3.00                      37,784.90
 PO=SS>                                                              
 14-day           3.8100      3.7550      +5.50                      5,902.10
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.5600      2.6100      -5.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.0000      3.0600      -6.00                      
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           3.8600      3.8000      +6.00                      
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.5970      2.6310      -3.40                      
                                                                     
 Seven-day        2.8810      2.8910      -1.00                      
                                                                     
 Three-month      4.7076      4.7054      +0.22                      
                                                                     
 
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=        3.9500               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 = 6.3407 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by
Jacqueline Wong)
  
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