SHANGHAI: China's key money rates fell slightly on Monday o n ample liquidity in the market, but dealers expect a rebound later this week as the impact of a cut in the amount of cash reserves banks must hold begins to fade.
The benchmark weighted-average seven-day bond repurchase rate inched down 1.92 basis points to 2.6726 percent by midday, hovering around a 13-month low.
The 14-day money rate rose 0.18 basis points to 2.8296 percent from 2.8278 percent, while the one-day money rate fell to 1.8207 points from Friday's 1.8295 percent.
"Money was still very ample in the market, so the rate continued to hovered around low level," said a dealer at a Chinese bank in Shanghai. "But, as the effects of RRR cut fade out, the rate could rebound slightly."
China announced a 50 bps cut in required reserve ratios (RRR) on May 12 to inject more liquidity into the financial system after economic data the day before showed slowing output, investment, retail sales and bank lending.
Dealers said month-end factors could also push up rates slightly. Banks often keep cash on hand at the end of each month in order to meet the regulatory loan-to-deposit ratio, set at 75 percent.
Interest rates swaps (IRS) were largely flat as comments by Chinese Premier Wen Jiabao that the government will focus more on bolstering growth reinforced expectations of further monetary easing to come.
"The market thinks Wen's comments indicated the government could use some stimulus policies to boost economy," said a dealer at an Asian bank in Shanghai.
Benchmark five-year IRS rose slightly around 3.0 percent, while 10-year IRS rose to 3.30 percent from Friday's 3.04 percent.
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