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Winni Zhou

Fed easing could prompt first China rate cut in four years - analysts

08 Jul 2019

SHANGHAI China's central bank could cut its benchmark policy rate for the first time in four years if the U.S. Federal Reserve delivers a widely expected cut in late July, analysts say, as Chinese policymakers step up support for the slowing economy.

China's small banks turn to exchanges for cash as money markets tighten

19 Jun 2019

SHANGHAI China's smaller banks and brokers are turning to stock exchanges to borrow short-term cash this week to escape the typical end of June pressure in money markets and more recent worries over credit risks in the sector.

China to stabilise yuan with Hong Kong bill issue

11 Jun 2019

SHANGHAI China's central bank will sell yuan-denominated bills in Hong Kong in late June, in a move some market analysts believe is aimed at preventing the yuan currency from declining further.

UPDATE 2-China to stabilise yuan with Hong Kong bill issue

11 Jun 2019

* China c.bank says HK bill sale to improve yuan bond yield curve

China central bank steps up liquidity support for more banks after Baoshang takeover

06 Jun 2019

SHANGHAI Boosting liquidity to the financial system on Thursday, China's central bank signaled its readiness to supply smaller banks with a steady stream of cash after the takeover of a troubled lender, letting more banks access the funds.

China central bank may open taps with cash shortfall looming

31 May 2019

SHANGHAI China's central bank splashed more cash into the banking system this week than at any time in the past four months, but fresh signs of economic weakness and a worsening trade war may raise the chance it will deploy bolder stimulus.

After Baoshang rescue, China central bank pours cash into banking system

29 May 2019

SHANGHAI China's central bank made its biggest daily net fund injection into the banking system in more than four months on Wednesday, a move traders saw as an attempt to calm the money market after the rescue of a troubled bank.

UPDATE 1-China's money rates jump after Baoshang Bank takeover stokes liquidity fears

28 May 2019

(Recasts, adds analyst comments in paragraphs 7-11) By Andrew Galbraith and Winni Zhou SHANGHAI, May 28 China's primary money rates rose on Tuesday as market sentiment remained fragile after the takeover by regulators of a troubled regional bank, heralding a possible weakening of small banks' ability to access interbank funding. The People's Bank of China (PBOC) vowed on the weekend to offer liquidity support to Inner Mongolia-based Baoshang Bank after regulators took it over, citing serious credit risks posed by the lender. While the central bank kept pumping liquidity into financial system, interbank rates stayed up on worries about broader contagion risks. The PBOC injected a net 70 billion yuan ($10.14 billion) through its regular open market operations on Tuesday, following on from the previous day's 80 billion yuan net cash injection. "The Baoshang incident is pressuring short-term liquidity," said a trader at a Chinese bank. "Along with month-end seasonal factors, cash conditions are becoming tighter and pushing up the near-date swap points higher. And that has led the swap curve moving upward." Chinese liquidity conditions typically tighten at month-end as cash demand rises due to factors including bank requirements for funds to meet regulatory requirements such as loan-to-deposit ratios. Ji Tianhe, China rates and FX strategist at BNP Paribas in Beijing, said that the takeover of Baoshang could be interpreted as a "marginal targeted deleveraging" campaign, and could change the ecosystem of the interbank market. "Smaller banks are supposed to serve the real economy, but some turned out be very active in interbank trading in order to expand their size. Now this latest move is pushing similar small lenders back to their core business," Ji said. He added that as small banks are not allowed to borrow in the exchange market and have to largely rely on bigger banks for interbank funding, "they are now facing a challenging funding situation." Fitch Ratings downplayed the effect of the Baoshang takeover on interbank rates, but said that the regulatory seizure indicated general weakness among China's smaller lenders. "We believe the government's propensity to support small banks is lower than for the large state banks, while the impact that a small bank failure would have on market confidence is untested," the rating agency said in a statement. On Tuesday, 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 2.8489%. That was 7.66 basis points higher than the previous day's closing average rate, and up more than 30 basis points from the previous week's close of 2.5469%. The Shanghai Interbank Offered Rate (SHIBOR) for the same tenor rose to 2.8230%, up 11.20 basis points from the previous close, and 23.1 basis points from Friday's closing rate. The one-day or overnight rate stood at 2.8000% and the 14-day repo stood at 3.0695%. The takeover of Baoshang Bank had jolted markets on Monday, leading to a rise in yields on some banks' negotiable certificates of deposit, a popular short-term interbank debt instrument. The spread between low-rated 3-month NCDs and their AAA rated equivalents widened by 4.57 basis points on Tuesday, according to Refinitiv data. Analysts at OCBC bank said in a note on Tuesday that the takeover had sparked a sell-off in Chinese sovereign bonds on Monday after reports that corporate deposits and interbank liabilities over 50 million yuan could be subject to a haircut of 20%-30%, "due to concern about the possible break of implicit guarantee." "This may cause interbank lenders to reassess their relationship with the smaller lenders," the analysts said. On Tuesday, treasury futures rebounded from what market watchers viewed as an overcorrection, with the most-traded contract, for September delivery, climbing as much as 0.37%. "Futures took off as soon as the big banks started buying," said a Shanghai-based trader at an Asian bank. Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.8000 2.6678 +13.22 0.00 Seven-day 2.8489 2.7723 +7.66 0.00 14-day 3.0695 2.8444 +22.51 0.00 Shanghai stock exchange repo market Overnight 1.5500 1.9050 -35.50 655,931.8 0 Seven-day<CN7DR 2.8750 3.0100 -13.50 83,505.10 PO=SS> 14-day 2.7500 2.7400 +1.00 9,488.30 PBOC Guidance Rates Overnight 2.8200 2.6800 +14.00 <CN1DRPFIX=CFXS > Seven-day 3.0000 2.8000 +20.00 <CN7DRPFIX=CFXS > 14-day 3.3500 2.8500 +50.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.7600 2.6660 +9.40 Seven-day 2.8230 2.7110 +11.20 Three-month 2.9150 2.9040 +1.10 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= 0.0000 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 = 6.9039 Chinese yuan) (Reporting by Andrew Galbraith and Winni Zhou Editing by Shri Navaratnam)

China's money rates rise after Baoshang Bank takeover stokes liquidity worries

28 May 2019

By Andrew Galbraith and Winni Zhou SHANGHAI, May 28 China's primary money rates rose on Tuesday as market sentiment remained fragile after the takeover by regulators of a troubled regional bank. The People's Bank of China (PBOC) vowed on the weekend to offer liquidity support to Inner Mongolia-based Baoshang Bank after regulators took it over, citing serious credit risks posed by the lender. While the central bank kept pumping liquidity into financial system, interbank rates stayed up on worries about broader contagion risks. The PBOC injected a net 70 billion yuan ($10.14 billion) through its regular open market operations on Tuesday, following on from the previous day's 80 billion yuan net cash injection. "The Baoshang incident is pressuring short-term liquidity," said a trader at a Chinese bank. "Along with month-end seasonal factors, cash conditions are becoming tighter and pushing up the near-date swap points higher. And that has led the swap curve moving upward." Chinese liquidity conditions typically tighten at month-end, triggered by factors including bank requirements for funds to meet regulatory requirements such as loan-to-deposit ratios. On Tuesday, 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 2.8489%. That was 7.66 basis points higher than the previous day's closing average rate, and up more than 30 basis points from the previous week's close of 2.5469%. The Shanghai Interbank Offered Rate (SHIBOR) for the same tenor rose to 2.8230%, up 11.20 basis points from the previous close, and 23.1 basis points from Friday's closing rate. The one-day or overnight rate stood at 2.8000% and the 14-day repo stood at 3.0695%. The takeover of Baoshang Bank had jolted markets on Monday, leading to a rise in yields on some banks' negotiable certificates of deposit, a popular short-term interbank debt instrument. The spread between low-rated 3-month NCDs and their AAA rated equivalents widened by 4.57 basis points on Tuesday, according to Refinitiv data. Analysts at OCBC bank said in a note on Tuesday that the takeover had sparked a sell-off in Chinese sovereign bonds on Monday after reports that corporate deposits and interbank liabilities over 50 million yuan could be subject to a haircut of 20%-30%, "due to concern about the possible break of implicit guarantee." "This may cause interbank lenders to reassess their relationship with the smaller lenders," the analysts said. On Tuesday, treasury futures rebounded from what market watchers viewed as an overcorrection, with the most-traded contract, for September delivery , climbing as much as 0.37%. "Futures took off as soon as the big banks started buying," said a Shanghai-based trader at an Asian bank. Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.8000 2.6678 +13.22 0.00 Seven-day 2.8489 2.7723 +7.66 0.00 14-day 3.0695 2.8444 +22.51 0.00 Shanghai stock exchange repo market Overnight 1.5500 1.9050 -35.50 655,931.8 0 Seven-day<CN7DR 2.8750 3.0100 -13.50 83,505.10 PO=SS> 14-day 2.7500 2.7400 +1.00 9,488.30 PBOC Guidance Rates Overnight 2.8200 2.6800 +14.00 <CN1DRPFIX=CFXS > Seven-day 3.0000 2.8000 +20.00 <CN7DRPFIX=CFXS > 14-day 3.3500 2.8500 +50.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.7600 2.6660 +9.40 Seven-day 2.8230 2.7110 +11.20 Three-month 2.9150 2.9040 +1.10 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= 0.0000 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 = 6.9039 Chinese yuan) (Reporting by Andrew Galbraith and Winni Zhou Editing by Shri Navaratnam)

Light PBOC touch makes once unlikely yuan at 7/$ seem possible

24 May 2019

SHANGHAI As China's yuan slips to historically weak levels against the dollar, the central bank's atypical light touch is spurring speculation that policymakers want to be more judicious in their intervention and have no specific target for the currency.

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