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China's money rates up, driven by corporate tax payment
September 15, 2017 / 7:01 AM / in 2 months

China's money rates up, driven by corporate tax payment

    SHANGHAI, Sept 15 (Reuters) - China's primary money rates
edged up slightly for the week as a central bank-led net fund
injection was offset by seasonal cash demand.
    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 2.8724
percent on Friday afternoon, close to 4 basis points higher than
the previous week's closing average rate of 2.8282 percent. 
    Traders said cash conditions started to get tight later in
the week mainly due to factors including corporate tax payments,
which offset some of the impact from liquidity support from the
central bank.
    In the open market operations, the People's Bank of China
(PBOC) injected a net 260 billion yuan via its reverse bond
repurchase agreements for the week, compared with a net drain of
330 billion yuan a week earlier. The weekly net cash injection
was the first in four weeks.
    The PBOC explained in a statement on Friday that the cash
injection was aimed to keep the liquidity "basically stable" to
counter factors including "tax period and financial
institutions' reserve requirement contributions".
    A batch of six-month medium-term lending facility loans with
a volume of 113.5 billion yuan is due to mature on Saturday.
    The PBOC has already injected 298 billion yuan into the
financial system via one-year MLF loans last week, more than
compensating for the 283 billion yuan of such loans that mature
this month. 
    Separately, China's central bank on Monday scrapped two
measures that were put in place to support the yuan when it was
under significant selling pressure, suggesting Beijing is
anxious to quash one way bets on the yuan as outflows ease and
exporters face strain.
    One of the two measures was lifting rules that required
foreign banks to put aside reserves for offshore yuan deposits.
Both foreign exchange traders and money market participants said
the move would improve offshore liquidity but expected limited
impact on the onshore cash conditions. 
    
    Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.6834      2.6925      -0.91                      0.00
                                                                     
                                                                     
 Seven-day        2.8724      2.9109      -3.85                      0.00
                                                                     
                                                                     
 14-day           4.0829      3.8451      +23.78                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        4.0300      3.6950      +33.50                     371,779.0
                                                                     0
                                                                     
 Seven-day<CN7DR  4.1950      4.1550      +4.00                      51,700.20
 PO=SS>                                                              
 14-day           4.5000      4.3200      +18.00                     4,638.50
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.6900      2.6800      +1.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        3.4400      3.5000      -6.00                      
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           4.1000      4.0000      +10.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.6958      2.6810      +1.48                      
                                                                     
 Seven-day        2.8320      2.8239      +0.81                      
                                                                     
 Three-month      4.3647      4.3675      -0.28                      
                                                                     
 
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=        3.7300               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 Andrew Galbraith)
  

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