SHANGHAI: China's money rates rose on Tuesday, with the benchmark seven-day repo rate jumping over 19 basis points on expectations that the People's Bank of China (PBOC) will probably conduct another net drain from money markets this week.
The central bank injected 91 billion yuan ($14.55 billion) into the market via seven- and 28-day reverse bond repurchase agreements on Tuesday, doing little to offset the 386 billion yuan due to drain from money markets this week through a combination of maturing repos, bills and reverse repos.
"Today's funds are tighter than before. Demand from borrowers is larger than willingness to lend, and from today's amount of reverse repos, it's clear that the central bank is highly likely to drain funds this week," said a dealer at an Asian bank in Shanghai.
Traders said that 50 billion yuan worth of longer-term deposits would mature on Tuesday, draining additional funds, which was another reason for tighter liquidity.
The central bank also conducted a net drain last week, drawing 221 billion yuan out of the interbank market. But there was no strong initial reaction in the benchmark weighted-average seven-day bond repurchase rate at the time, which remained below 3 percent. Traders said that signalled relatively loose conditions.
The central bank had previously conducted massive cash injections starting in mid-September in anticipation of a week-long holiday in the first week of October, and made another injection the week markets resumed operations on Oct. 8.
But money rates began rising again on Monday, steadily closing on the 3 percent level.
The seven-day bond repurchase rate jumped 19.42 basis points to 2.9118 percent, up from 2.7176 percent at the close on Monday.
The 14-day repo rate edged up to 3.4116 percent from 3.3953 percent, and the overnight repo rate rose to 2.3517 percent from 2.2505 percent.
Comments
Comments are closed.