June 9, 2017 / 7:27 AM / 2 months ago

China's money rates edge down for the week, concerns over seasonal factors

    SHANGHAI, June 9 (Reuters) - China's primary money rates
edged lower for the week after the central bank injected fresh
funds through medium-term loans, but traders said they still
expected pressure on liquidity from seasonal factors including
upcoming tax payments.
    The volume-weighted average rate of the benchmark seven-day
repo traded in the interbank market, considered
the best indicator of general liquidity in China, was 2.8251
percent on Friday, more than 17 basis points lower than the
previous week's closing average rate at 2.9981 percent. 
    Traders said there were few signs of liquidity stress  this
week after fresh fund injections led by the central bank. 
    A Shanghai-based trader at a Chinese bank said monthly
payments of a regulatory tax will begin next week, while the
central bank's quarterly Macro Prudential Assessment (MPA) will
tighten liquidity further.
    The People's Bank of China injected 498 billion yuan ($73.27
billion) into the financial system through its medium-term
lending facility (MLF) loans on Tuesday, more than offsetting
tha amount of maturing loans this month.
    Three batches of earlier MLF loans totaling 431.3 billion
yuan are due to mature in June, according to Reuters
calculations based on official data from the central bank.
    Market players did not expect the central bank to renew a
batch of maturing six-month MLF loans with a value of 207
billion yuan next Friday, but anticipated the PBOC would raise
its interest rates soon, with expectations that the U.S. Federal
Reserve interest rate hike next week.
    In March, after the U.S. Fed raised interest rates, the PBOC
lifted short-term interest rates in what economists said was a
bid to stave off capital outflows and keep the yuan stable.
    The central bank has injected 974.2 billion yuan on a net
basis through the MLF loans so far this year, compared with a
net drain of 775 billion yuan via open market operations during
the same period, according to Reuters calculations based on the
official data from the PBOC.
    Nearly 200 billion yuan of accumulated net cash injection
with longer maturity into the country's financial system so far
this year clearly showed that the authorities have been walking
a tight rope between maintaining overall liquidity in the
market, while deleveraging and reducing risks without hurting
the real economy.
    In the open market operations, the PBOC drained a net 10
billion yuan from the money market this week, compared with a
net injection of 30 billion yuan a week earlier.

 Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.8253      2.8294      -0.41                      0.00
                                                                     
                                                                     
 Seven-day        2.8251      3.0011      -17.60                     0.00
                                                                     
                                                                     
 14-day           3.8941      3.9743      -8.02                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        2.7600      2.8250      -6.50                      299,542.4
                                                                     0
                                                                     
 Seven-day<CN7DR  3.3850      3.4000      -1.50                      42,459.20
 PO=SS>                                                              
 14-day           3.6500      3.7050      -5.50                      4,595.70
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.8500      2.8200      +3.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.4000      3.6000      -20.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           3.9200      4.0000      -8.00                      
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.8275      2.8199      +0.76                      
                                                                     
 Seven-day        2.8949      2.8939      +0.10                      
                                                                     
 Three-month      4.7555      4.7306      +2.49                      
                                                                     
 
KEY INTEREST RATE SWAPS:
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
                                                 rate*
 2 yr IRS based on 1   CNABAD2YF=        0.0000              -1.5
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.7900               n/a
 
*This spread can be seen as a proxy for forward-looking market
expectations of an interest rate cut or rise

China FX and money market guide: 
 China debt market guide:
 SHIBOR rates:
 Reports on central bank open market operations:
 New Chinese debt issues:
 Prices for central bank bills, treasury bonds and sovereign
bonds:
 Overview of China financial market data:

($1 = 6.7969 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by Simon
Cameron-Moore)
  

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