SHANGHAI: China's money markets rose on Friday, with the major benchmark money rate gaining over 24 basis points on cash demand for month-end tax payments and the looming lunar new year holiday that will close markets for a week.
The seven-day bond repurchase agreement closed out the week averaging over 4.16 percent up from 3.92 percent the previous Friday, the first time it has done so since December. Other commonly traded tenors also rose.
Liquidity conditions remain a subject of intense focus this week given the condition of the stock market, where regulators have been moving to tighten up the routing of credit out of the interbank market and into stocks.
Cash demand was most evident in the trading for bond repos on the Shanghai stock exchange, which can be more easily accessed by retail investors. The seven-day repo gained 297 basis points to price at 6.4 percent on Friday, its sharpest one-day rise on the exchange since mid-December.
The People's Bank of China (PBOC) has returned to open market operations in late January after a long hiatus, putting cash back into the interbank market to satisfy the cyclical demand, and the treasury bond curve has come down slightly over the course of the month.
The curve for the seven-day repo has tilted as investors look for cheaper money going forward as the central bank is widely expected to further ease policy in the face of wobbly economic prospects in 2015.
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