China's IRS fall on central bank liquidity injection

Thursday, 14 June 2012 11:09

Posted by Imaduddin

296

SHANGHAI: China's interest-rate swaps (IRS) fell moderately on Thursday, ending three straight days of rises, as the central bank signalled that it will ensure a stable supply of liquidity to the market.

"I feel that money conditions are better than on previous days," said a dealer at a state-owned bank in Beijing.  

The People's Bank of China injected a net 36 billion yuan into the banking system, the largest net injection since early May, just days before it announced a cut in banks' required reserve ratio.

The benchmark five-year IRS fell to 2.73 percent near midday, from 2.80 percent at Wednesday's close.

One-year IRS were flat at around 2.50 percent.

Repo rates were little changed, with the benchmark weighted-average seven-day bond repurchase rate up 0.49 basis points to 2.7039 percent by midday. Overnight rates rose 5.30 bps to 2.5571.

Several dealers said that money rates had little room to fall through the rest of June, as banks focus on raising cash meet quarterly assessments of the mandated loan-to-deposit ratio and other regulatory indicators.

Although detailed criteria for the checks are not made public, dealers say quarterly and yearly reviews are more thorough than monthly check-ups.

Big banks also face a strong pressure of deposit outflows following recent by higher deposit rates being offered by smaller banks.