SHANGHAI: China's money rates extended falls on Friday on ample supply and after the People's Bank of China signalled it intended to keep a lid on money rates by supplying liquidity via reverse repos.
Dealers said the market was confident about money conditions and expected rates to hover at relatively low levels as authorities will keep conditions easy to help the economy.
China's central bank will use reverse repos as a regular tool in open market operations going forward, a source with direct knowledge of the situation told Reuters
"The reverse repo rates could be a guidance for us. Recently, the central bank sent the signal that the key money rate should be around 3.0-3.5 percent," said a dealer in a Chinese bank in Shanghai.
The weighted average of the benchmark seven-day repo rate fell to 3.1932 percent from Thursday's close of 3.2327 percent.
The one-day rate fell to 2.2891 percent from 2.3731 percent, while the 14-day repo rate fell to 3.5850 percent from 3.4746 percent.
But some dealers said they were still concerned that the peak period for companies to make annual tax payments, which falls in May, will divert funds that would otherwise be available for lending and put upward pressure on rates.
Chinese interest rate swaps rose on Friday on rising expectations that interest rates will not be cut in the near future, while inflation continued to fall in April.
The April consumer price index (CPI) rose 3.4 percent year-on-year, a touch above the 3.3 percent rise forecast in a Reuters poll but down from the 3.6 percent pace logged in March.
The benchmark five-year IRS gained 4 basis points to 3.35 percent, while one year IRS rose to 2.15 percent.
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