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Chinese borrowing rates plunge day after record cash injection
September 26, 2012 / 4:31 AM / 5 years ago

Chinese borrowing rates plunge day after record cash injection

* Tuesday's record injection by China starts to kick
    * Key Chinese 7 day repo rate down 99.73 bps
    * Overnight repo rate down 147.27 bps, biggest drop since

    SHANGHAI, Sept 26 (Reuters) - Chinese money rates plunged
overnight as the effects from Tuesday's record 290 billion yuan
($45.98 billion) cash injection took effect.
    In a delayed reaction to the largest single-day liquidity
injection by the Chinese central bank, the benchmark seven-day
repurchase rate fell 99.73 basis points to 3.7003
percent, reversing a rising trend that began Sept 18.
     The 14-day tenor was down 55 basis points in
morning trading, while the overnight rate plunged
147 basis points, the largest fall since February this year.
    The drop in rates will be a relief for the central bank,
struggling to ease a liquidity crunch as banks stockpile cash
ahead of the public holiday in the first week of October, while
at the same time setting aside money to make regulatory escrow
payments due on Oct 8.
    "Having put in such a huge amount of reverse repos, the
central bank certainly doesn't want to see liquidity tightening
in the markets, so they'll be relieved to see the rates fall," a
dealer at a Chinese bank in Beijing said. 
    The delayed market reaction mirrors a similar pattern seen
after the central bank injected 220 billion yuan on Aug 21, when
 rates only fell the following day.
    Weak investor demand for government bonds was apparent as
China's Ministry of Finance auctioned 28 billion yuan at an
average yield of 4.10 percent on Wednesday morning, above the
forecast of 3.98 percent. 
    "The yield is significantly higher than our expectation, at
least ten basis points," the Beijing dealer said.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.7003      4.6976    - 99.73
7-day SHIBOR           3.7417      4.7408    - 99.91  
 Note: Repo rate is weighted average.
($1 = 6.3066 Chinese yuan)

 (Reporting by Chen Yixin and Pete Sweeney; Editing by Simon

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