October 19, 2018 / 5:53 AM / a month ago

China's money rates flat, RRR cut offsets rising cash demand for tax payment

    SHANGHAI, Oct 19 (Reuters) - China's primary money rates
were largely flat for the week, as cash support from a reduction
in bank's reserve requirement offset rising demand from
corporates to make 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 2.6042
percent, about 1 basis points higher than the previous week's
closing average rate of 2.5933 percent.
    On Monday, a 100-basis point cut in banks' reserve
requirement ratios (RRR), announced by the People's Bank of
China (PBOC) on Oct. 7., came into effect.
    The cut added a net 750 billion yuan in cash into the
banking system by releasing a total of 1.2 trillion yuan in
liquidity, with 450 billion yuan of that to offset maturing
medium-term lending facility (MLF) loans.
    Companies and financial institutions are set to make
July-September tax payments in mid-October. Traders said the
peak of tax payments will kick in next week, and they expect the
central bank to inject additional funds via open market
operations.
    The PBOC on Friday resumed its open market operations for
the first time since the U.S. Federal Reserve raised interest
rates on Sept.27. The PBOC injected 30 billion yuan and kept
reverse repo rate unchanged at 2.55 percent from the previous
such injection.
    "The PBOC's decision not to follow Fed's most recent hike
indicates that the central bank intends to keep the liquidity
conditions accommodative and short term rates low," analysts at
China International Capital Corporation (CICC) said in a note.
    China reported on Friday its slowest quarterly economic
growth since the height of the global financial crisis in 2009. 
    The economy grew 6.5 percent in the third quarter from a
year earlier, the National Bureau of Statistics said on Friday. 

    
Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.4365      2.4069      +2.96                      0.00
                                                                     
                                                                     
 Seven-day        2.6042      2.5822      +2.20                      0.00
                                                                     
                                                                     
 14-day           2.6551      2.6272      +2.79                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        2.7750      2.2750      +50.00                     164,156.8
                                                                     0
                                                                     
 Seven-day<CN7DR  2.7900      2.5550      +23.50                     33,379.60
 PO=SS>                                                              
 14-day           2.9150      2.7700      +14.50                     6,414.50
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.4500      2.4400      +1.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        2.6100      2.6000      +1.00                      
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           2.7000      2.7200      -2.00                      
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.4450      2.4270      +1.80                      
                                                                     
 Seven-day        2.6220      2.6110      +1.10                      
                                                                     
 Three-month      2.8420      2.8320      +1.00                      
                                                                     
 
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=        3.2100               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 Winni Zhou and John Ruwitch; Editing by Simon
Cameron-Moore)
  
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