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China's money rates fall despite large net drain
January 10, 2013 / 6:03 AM / in 5 years

China's money rates fall despite large net drain

* Key 7-day repo rate falls to 1-month low
    * C.bank conducts 220 bln yuan drain, biggest since mid-Oct

    By Chen Yixin and Pete Sweeney
    SHANGHAI, Jan 10 (Reuters) - China's money rates fell on
Thursday, with the key seven-day repo rate dipping to below 3
percent, indicating loose money conditions prevail in the market
even after a sizeable drain from open market operations.
    The People's Bank of China drained a net 220 billion yuan
($35.33 billion) from the interbank market this week, the
biggest drain since mid-October, but dealers said the impact was
limited.
    "Funding conditions have changed little. Now we have
oversupply," said a dealer at an Asian bank in Shanghai. 
    Dealers said the reason for money rates hovering around low
levels is because the market is optimistic that the central bank
will continue to inject funds.
    Central bank purchases of dollars in December, intended to
slow the appreciation of the yuan in the domestic forex market,
had a side effect of increasing the base money supply and
increasing liquidity, dealers said. 
    The benchmark weighted-average seven-day bond repurchase
rate fell 7 basis points to 2.92 percent, its
lowest level since Dec. 13. and down from 2.99 percent at the
close on Wednesday.
    The 14-day repo rate fell to 2.90 percent
from 3.00 percent, and the one-day repo rate 
inched up to 2.11 percent from 2.09 percent.
        
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         2.9211     2.9946    - 7.35
7-day SHIBOR           2.9990     3.0245    - 2.55  
 Note: Repo rate is weighted average.
     
($1 = 6.2262 Chinese yuan)

 (Editing by Jacqueline Wong)

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