April 5, 2012 / 5:42 AM / 6 years ago

China's money rates jump on required reserve payments

* Banks meet regular RRR payments
    * Large amount of deposits pressures market liquidity
    * Market expects money rates could stabilise or fall back

    By Chen Yixin and Gabriel Wildau	
    SHANGHAI, April 5 (Reuters) - China's money rates jumped on
Thursday, as banks held back lending in order to meet their
reserve requirement ratios (RRR), after rushing to attract
deposits at the end of last quarter.	
    "The key reason (for the rise in rates) is the payment of
RRR," said a dealer at a Chinese bank in Shenzhen. "Many banks
rushed to attract a large amount of deposits at the end of the
first quarter, so we need to pay more."	
    Banks always need to attract deposits during the month- or
quarter-end to meet regulatory loan-to-deposit ratios
    At the same time, banks must make regular payments on 5th,
15th and 25th in order to meet the RRR, with the amount of the
payment adjusting based on the current volume of deposits. A
banks whose deposit base has shrunk can withdraw money from its
central bank reserves, while a bank with increasing deposits
must add funds to its account at the central bank.	
    The weighted-average seven-day bond repurchase rate
 was up 53.14 basis points at 3.9812 percent at
midday, compared with 3.4498 percent at the close on Friday, the
last trading day before the Tomb Sweeping holiday. The overnight
repo rate, gained 38.21 bps to 3.0253 percent.	
    The 14-day repo rate rose to 4.0538 percent
from 3.5154 percent. 	
    Traders said the impact of RRR payments was usually
short-lived so money rates could stabilize or even fall back in
coming days. 	
                                 Current  Prev close  Change	
                                      (pct)           (bps)  	
7-day repo         3.9812     3.4498     +53.14	
7-day SHIBOR           3.9658     3.4400     +52.58	
 Note: Repo rate is weighted average.	
 ($1 = 6.3060 Chinese yuan)	
 (Editing by Jonathan Hopfner)

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