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4 years ago
China money rates stay high, ignore small PBOC injection
June 18, 2013 / 5:07 AM / 4 years ago

China money rates stay high, ignore small PBOC injection

* Market is worried over near-term liquidity supply
    * Benchmark 7-day repo rate slips but still at 6.79 pct
    * PBOC lets maturing bills, repos to inject money slightly
    * Refusal to pump money into market signals confidence

    By Lu Jianxin and Gabriel Wildau
    SHANGHAI, June 18 (Reuters) - China's short-term funding
costs remained at very high levels on Tuesday as the market
ignored a small cash injection by the central bank and worried
about near-term liquidity.
    The benchmark weighted-average seven-day bond repurchase
rate dropped 9 basis points (bps) but remained at
an elevated level of 6.80 percent by midday.
    The overnight repo rate jumped 73 bps to 5.61
percent, while the 14-day rate was also high at
5.81 percent, though down from 6.62 percent on Monday.
    "Market players are worried over cash supply at least until
early July, while the central bank appears to believe overall
market liquidity conditions are not so bad," said a dealer at a
major Chinese state-owned bank in Shanghai.
    The market has recently been hit by heavy fund demand,
including from the approach of quarter-end, when banks need more
cash to meet regulatory checks and to boost reported deposit
totals in their quarterly reports to shareholders.
    The People's Bank of China (PBOC) injected a net 25 billion
yuan ($4.1 billion) into the market on Tuesday as 27 billion
yuan in maturing bills and repos offset a drain of 2 billion
yuan via three-month bills. But traders said the injection was
too small to have any significant impact. 
    Traders said the PBOC appeared to be signaling the
government's confidence in the economy, despite signs of a
growth slowdown, by refraining from coming to the market's
rescue in recent weeks even when the market was hit by the
liquidity squeeze. 
    
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         6.7977     6.8875    - 8.98
7-day SHIBOR           6.7030     6.8480    -14.50 
 Note: Repo rate is weighted average.
    
        >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> 
       
    MARKET DRIVERS
    - China opens new front in war as yuan speculation distorts
export data 
    - China seeks to curb speculative flows without monetary
tightening 
    - Markets spin on liquidity switches 
    - Non-bank financing to rise in 2013 
    
    DATA POINTS
    - External liquidity tracker: FX purchases are main source
if liquidity injection in recent months GRAPHIC: r.reuters.com/das95t
    - Impact of maturing central bank bills and repos GRAPHIC: r.reuters.com/kas95t
    - Long-term Chinese govt bond yields slumped amid doubts on
growth GRAPHIC: r.reuters.com/jas95t
    - China's interest-rate swap curve has flattened GRAPHIC: r.reuters.com/has95t
    - China corporate bond spreads have narrowed slightly 
GRAPHIC: r.reuters.com/mas95t
    - Hot money tracker: Hot money inflows have returned in
2013, boosting liquidity GRAPHIC: r.reuters.com/was95t   
   >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>   
($1 = 6.1289 Chinese yuan)

 (Editing by Kim Coghill)

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