SHANGHAI: China's short-term lending rates extended their rise on Tuesday, as a moderate fund injection by the central bank failed to quell worries over month-end cash demand.
The weighted-average 14-day bond repurchase rate , whose maturity extends across the month-end period, rose 24 basis points to 5.61 percent at midday, a seven-week high.
The benchmark seven-day bond repo rate jumped 30 basis points to 4.48 percent, its highest level since Aug. 1. The overnight rate jumped 44 bps to 3.90 percent.
Chinese money-market rates often spike at month-end, as banks prepare extra cash to meet regulatory ratios and internal targets on deposits.
In late June, the seven-day rate rose to as high as 30 percent for individual trades, in a severe cash crunch that market participants widely regarded as a warning by the central bank to curtail risky lending and focus on deleveraging.
On Tuesday, the central bank injected 36 billion yuan ($5.9 billion) into money markets through seven-day reverse bond repurchase agreements, up from 11 billion yuan last Tuesday.
Dealers said that while the increase in reverse repos signaled that the central bank intends to prevent cash rates from rising to the crisis levels seen in June, the injection was not enough to prevent some further tightening.
"Even though the amount (of reverse repos) is rising (compared to last week), it is still not enough to ease market worries. Money rates should hover around high levels in the near term," said a dealer at a Chinese city commercial bank in Shanghai.
The People's Bank of China (PBOC) has conducted net fund injections through open market operations for nine of the last 11 weeks, but the volumes have been too small to significantly ease liquidity.
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