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China's money rates ease after biggest cash injection since January
November 17, 2017 / 3:48 AM / a month ago

China's money rates ease after biggest cash injection since January

    SHANGHAI, Nov 17 (Reuters) - China's primary money rates
fell for the week after the central bank made the largest weekly
net fund injection in 10 months, in what traders said was
targeted at easing liquidity stress in the financial system and
calming a recent bond market rout.
    The People's Bank of China (PBOC) injected a net 810 billion
yuan ($122.24 billion) via reverse repos in open market
operations this week, compared with a net drain of 230 billion
yuan a week earlier.
    The weekly net injection was the largest since mid-January.

    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 2.7470
percent on Friday morning, around 20 basis points lower than the
previous week's closing average rate of 2.9438 percent.
    Traders said the large cash injection was not only to
counter tight liquidity from seasonal tax payments and maturing
reverse repurchase agreements, but to ease tension from a
sell-off in bonds.
    China's 10-year treasury bond yields surged to a
high of 4.033 percent at one point this week, their highest in
more than three years, as institutions sold off liquid
securities to strengthen their cash positions amid worsening
market sentiment.
    "The recent CGB sell-offs appear to have struck a nerve with
 policymakers, prompting the PBOC to take action to stabilise
market liquidity conditions," said Ken Cheung, senior Asian FX
strategist at Mizuho Bank in Hong Kong.
    The yield on Chinese 10-year treasury bonds was at 3.950
percent on Friday morning, slightly higher than the previous
week's close at 3.918 percent.
    However, traders said they did not see liquidity support as
altering the PBOC's monetary policy stance. They see the central
bank continuing to closely manage cash conditions while keeping
its deleveraging campaign on track.
    Repo rates for other tenors also drifted lower this week.
The one-day or overnight repo rate stood at 2.6978 percent on
Friday morning, around 4 basis points lower than the previous
week's closing price. And the 14-day repo stood at 3.9112
percent, compared with last Friday's close of 3.9336 percent.
    The spread of the five-year credit default swap rate on
Chinese sovereign debt fell 2.19 percent to
61.57.  
    
    Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.6927      2.7873      -9.46                      0.00
                                                                     
                                                                     
 Seven-day        2.7470      2.8874      -14.04                     0.00
                                                                     
                                                                     
 14-day           3.9147      4.1633      -24.86                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        3.4850      3.2750      +21.00                     89,745.40
                                                                     
                                                                     
 Seven-day<CN7DR  3.9000      3.8900      +1.00                      25,455.60
 PO=SS>                                                              
 14-day           4.3550      4.2000      +15.50                     6,768.10
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.8000      2.8000      +0.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.1000      3.4400      -34.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           4.3000      4.4000      -10.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.8000      2.8000      +0.00                      
                                                                     
 Seven-day        2.8860      2.8860      +0.00                      
                                                                     
 Three-month      4.5656      4.5656      +0.00                      
                                                                     
 
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=        3.9400               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 = 6.6265 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by
Jacqueline Wong)
  

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