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china-central-bankSHANGHAI: China's money rates held firm on Thursday as the People's Bank of China's (PBOC) slight drain of funds for the week through open market operations kept money supply in a stable balance.


China's central bank injected 214 billion yuan ($34.36 billion) into the money markets through reverse bond repurchase agreements this week.


Including maturing bonds and reverse repos, this meant the bank drained a marginal net 40 billion yuan from the market for the week.


Dealers said small drains of funds had little impact on borrowing conditions, and pointed to high levels of fiscal deposits as keeping fund supply loose.


A Reuters analysis shows that the Ministry of Finance is likely to pump a record high 1.6 trillion yuan into the system in the last two months of this year through the transfer of tax revenues out of the central bank and into commercial banks.


"There is little change today in the money situation. My feeling is the central bank's slight drain of funds is a signal that it wants to keep money supply stable," said a dealer at an Asian bank in Shanghai.


Dealers added that willingness to lend funds had decreased slightly because of a spike in money demand at the month-end.


The benchmark weighted-average seven-day bond repurchase rate dipped 2.16 basis points to 3.3338 percent from 3.3554 percent at the close on Wednesday.


The 14-day repo rate rose slightly to 3.4276 percent from 3.3609 percent, and the one-day repo rate inched down to 2.3223 percent from 2.3262 percent.


In the bond market, interest rate swaps (IRS) were also little changed. One-year IRS was at 3.34 percent by midday, down slightly from Wednesday's close of 3.35 percent, while the benchmark five-year IRS dipped to 3.59 percent from 3.61 percent.

Copyright Reuters, 2012

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