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China money rates mixed as injections meet deleveraging push
July 21, 2017 / 5:35 AM / 2 months ago

China money rates mixed as injections meet deleveraging push

    SHANGHAI, July 21 (Reuters) - China's primary money rates were mixed on Friday despite the
largest weekly net injection in half a year as tax obligations kept liquidity tight and as
regulators continue to encourage deleveraging.
    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 2.8770
percent, up about 3 basis points from the previous day's closing average rate. 
    The People's Bank of China (PBOC) injected 140 billion yuan into money markets on Friday,
bringing total injections for the week to 510 billion yuan. It was the biggest net injection
since the week of Jan. 16, when the central bank injected 1.13 trillion yuan to avert a cash
crunch before the Lunar New Year.
    This week's net injection compares with a net drain of 70 billion yuan a week earlier.
    Despite the injections, market participants said overall liquidity remained relatively tight
as banks sought to meet tax and reserve requirement obligations. A Shanghai-based trader said
that 835 billion yuan in local government bond issuance this month was also affecting market
liquidity.
    Tight conditions are likely to remain as regulators continue to push for deleveraging
throughout the financial system.
    "I don't see much liquidity improvement in the next few weeks. As the leverage in the bond
market is not reducing, the PBOC has no reason to make leverage takers' life easy," said the
trader.
    The tightening bias is expected to continue beyond the next several weeks.
    "In general, I think the PBOC will implement monetary policy with a tightening bias. Even
though it is injecting cash it is not sufficient to cause a decline in the market rate," said
Ding Shuang, head of Greater China economic research at Standard Chartered in Hong Kong.
    He expects the market rate to remain relatively stable, though at a higher level than
earlier this year.
    The seven-day Shanghai Interbank Offered Rate (SHIBOR) fell less than one basis point from
the previous close to 2.8470 percent.
    The one-day or overnight rate stood at 2.7001 percent and the 14-day repo stood at 4.0484
percent.
    The spread of the five-year credit default swap rate on Chinese sovereign debt
 fell 1.85 percent to 66.41.
 

 Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.7001      2.8144      -11.43                     0.00
                                                                     
                                                                     
 Seven-day        2.8770      2.8502      +2.68                      0.00
                                                                     
                                                                     
 14-day           4.0484      4.1146      -6.62                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        4.0750      4.3450      -27.00                     203,077.5
                                                                     0
                                                                     
 Seven-day<CN7DR  3.9900      3.9350      +5.50                      32,719.10
 PO=SS>                                                              
 14-day           4.0000      3.9650      +3.50                      3,210.40
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.7500      2.7800      -3.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.4400      3.4400      +0.00                      
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           4.1000      4.3000      -20.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.7330      2.7534      -2.04                      
                                                                     
 Seven-day        2.8470      2.8530      -0.60                      
                                                                     
 Three-month      4.2550      4.2551      -0.01                      
                                                                     
 
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=        3.6700               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:

    
 (Reporting by Andrew Galbraith; Editing by Jacqueline Wong)
  

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