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China's key money rate rises on month-end and holiday demand
January 29, 2013 / 6:17 AM / 5 years ago

China's key money rate rises on month-end and holiday demand

* 7-day repo rate rises on strong month-end cash demand
    * Demand of 7-day tenor causes to inject 80 bln yuan
    * CICC expects tightening conditions before holiday

    By Chen Yixin and Pete Sweeney
    SHANGHAI, Jan 29 (Reuters) - China's key seven-day money
rates rose on Tuesday on expectations of strong cash demand
ahead of the Chinese New Year Holiday.
    China's central bank partially sated this demand by
injecting a net 27 billion yuan ($4.34 billion) into the market
on Tuesday.   
    Specifically, the bank injected 80 billion yuan through
seven-day reverse repos on Tuesday, which has partially offset
the 121 billion yuan worth of maturing instruments that are
draining cash from the markets this week. 
    The benchmark weighted-average seven-day bond repurchase
rate rose 12 basis points to 3.11 percent from
2.98 percent at the close on Monday.
    "Money is not hard to borrow, but given high demand, prices
are relatively high," said a dealer at a Chinese commercial bank
in Beijing.
    The 14-day repo rate fell slightly to 3.65
percent from 3.64 percent, still hovering around a nearly
one-month high level, as financial institutions allocated funds
for the Chinese New Year Holiday, starting from Feb. 9.
    Dealers said the high level of demand for the 14-day tenor
was also because given the closure of markets during the
upcoming holiday, those repos would actually mature in 21 days.
    China International Capital Corporation Limited (CICC) said
in its weekly report that the money conditions will remain tight
ahead of holiday, but the situation will be much better than
last year because China's net foreign exchange purchases are
expected to rise steadily in the first quarter of the year,
which would effectively inject yuan liquidity into the market.
    The intensified tempo of short-term liquidity pperations
will also enhance stability.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.1064     2.9842    +12.22
7-day SHIBOR           3.0995     3.8863    + 0.09  
 Note: Repo rate is weighted average.
($1 = 6.2226 Chinese yuan)

 (Editing by Sanjeev Miglani)

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