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China money rates rebound, but traders see ample liquidity
August 27, 2013 / 5:58 AM / 4 years ago

China money rates rebound, but traders see ample liquidity

* Key 7-day money rate rises 19 bps to 4.25 pct
    * withdraws 51.5 bln yuan by reissuing 3-month bills
    * That offsets 50 bln yuan injection of fin min deposits
    * Month-end fund squeeze shaping up to be mild

    By Chen Yixin and Gabriel Wildau
    SHANGHAI, Aug 27 (Reuters) - China's key money rates
rebounded moderately on Tuesday after the central bank withdrew
long-term funding late on Monday, but dealers say liquidity
remains ample and the traditional month-end fund squeeze was
shaping up to be mild. 
    China's central bank said on Monday that it had reissued
51.5 billion yuan ($8.41 billion) of three-year bills. That move
offsets a 50 billion yuan injection of three-month finance
ministry deposits on Tuesday morning.  
    In addition, the central bank injected an additional 29
billion yuan in seven-day funds into the money markets through
regular open market operations on Tuesday.
    Dealers said supply and demand of funds in the market are
roughly in balance.
    "Money is not hard to borrow," said a dealer at a city
commercial bank in Shanghai. "The central bank maintains the
pace (of fund injections) quite well." 
    The weighted-average overnight bond repurchase rate
 dropped 3 basis points (bps) to 3.02 percent. 
    The 14-day repo rate rose slightly by 6 bps
to 5.25 percent around midday, while the benchmark seven-day
repo rate jumped 19 bps to 4.25 percent.
    Money market rates often spike at month-end as banks prepare
extra cash to meet monthly regulatory checks and internal
liquidity targets. 
    But the seven-day rate, whose maturity now extends across
the month-end period, is still below its peak of 4.51 percent
last Tuesday, suggesting that the central bank has provided
enough liquidity to tide banks over through the month-end
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         4.2452     4.0596     +18.56 
7-day SHIBOR           4.2090        4.0230     +18.60
 Note: Repo rate is weighted average.

    - In wake of cash crunch, PBOC commits to transparency but
quietly tightens grip 
    - Capital outflows, slowing growth fuel monetary easing
    - CHINA MONEY-Tighter interbank regulation seen after cash
    - Collapse in China bond volumes exposes market's seamy side
    - China reform push means June turmoil may be just the
    - External liquidity tracker: Collapse in FX purchases 
hurts liquidity in May
    - Impact of maturing central bank bills and repos GRAPHIC:
    - Chinese government bond curve flattens on liquidity
squeeze, growth concerns GRAPHIC:
    - China's interest-rate swap curve is inverted on severe
liquidity squeeze GRAPHIC:
    - China corporate bond spreads have narrowed slightly 
    - Hot money tracker: Hot money inflows have returned in
2013, boosting liquidity GRAPHIC:

 (Editing by Jacqueline Wong)

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