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Key Chinese money rates fall after PBOC cash injection
August 29, 2013 / 4:27 AM / 4 years ago

Key Chinese money rates fall after PBOC cash injection

* Rare good liquidity supply at end of month
    * PBOC injects net 41.5 bln yuan into markets this week
    * Has changed tactics to offer easier short-term funds
    * But has kept longer-term liquidity under control

    By Lu Jianxin and Pete Sweeney
    SHANGHAI, Aug 28 (Reuters) - Most Chinese money rates
dropped on Thursday after the People's Bank of China (PBOC)
injected cash into the markets via reverse bond repurchase
agreements in its open market operations, adding to unusually
good liquidity supply at the end of the month.
    The weighted-average overnight repo rate 
dropped 14 basis points (bps) to 2.96 percent, while the 14-day
rate tumbled 62 bps to 4.39 percent.
    The benchmark seven-day, however, edged up 6
bps to 4.35 percent as institutions needed cross-month funds for
seasonal demand at month-end, when banks must meet regulatory
requirements such as the 75 percent loan-to-deposit ratio.
    The PBOC injected 26 billion yuan ($4.25 billion) into the
money markets through 14-day reverse repos on Thursday, meaning
it will inject a net 41.5 billion yuan into the market this
    The central bank has apparently changed its tactics in
managing liquidity after its problematic handling of a fund
squeeze in the money markets in June caused China's main stock
index to plunge 20 percent in less than a month and
resulted in widespread worries over the health of China's
financial system. 
    Its continuous cash injections over the past two months have
helped market liquidity to stay ample, traders said.
    However, the PBOC has re-issued three-year bills outside
normal open market operations four times since July in order to
lock up longer-term funds, a sign that authorities continue to
implement a policy of keeping money-market liquidity relatively
tight, traders said.
    Traders said they expected money rates to retreat further
next week, with the seven-day repo rate likely falling back to
the range of 3-4 percent in which it has mostly moved this year.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         4.3528     4.2964     + 5.64
7-day SHIBOR           4.3180     4.2590    + 5.90
 Note: Repo rate is weighted average.

    - In wake of cash crunch, PBOC commits to transparency but
quietly tightens grip 
    - Capital outflows, slowing growth fuel monetary easing
    - CHINA MONEY-Tighter interbank regulation seen after cash
    - Collapse in China bond volumes exposes market's seamy side
    - China reform push means June turmoil may be just the
    - External liquidity tracker: Collapse in FX purchases 
hurts liquidity in May
    - Impact of maturing central bank bills and repos GRAPHIC:
    - Chinese government bond curve flattens on liquidity
squeeze, growth concerns GRAPHIC:
    - China's interest-rate swap curve is inverted on severe
liquidity squeeze GRAPHIC:
    - China corporate bond spreads have narrowed slightly 
    - Hot money tracker: Hot money inflows have returned in
2013, boosting liquidity GRAPHIC:

 (Editing by Kim Coghill)

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