SHANGHAI: China's money rates jumped on Thursday, with dealers saying that year-end cash demand was crimping market liquidity, despite a net injection of funds by the central bank this week.
Cash demand typically rises at year-end, as households and firms draw on deposits to pay for bonuses and holiday shopping.
"Actually, the monetary conditions have not really tightened, but many banks have started to put money aside for year-end, and no one wants to lend funds," said a dealer at a state-owned bank in Beijing.
The People's Bank of China (PBOC) conducted a net injection of 92 billion yuan ($14.77 billion) into the banking system this week, according to Reuters' calculations, its largest net injection in eight weeks.
"When the market really needs money, injections only have a small impact on conditions," said the state-owned bank dealer.
The benchmark weighted-average seven-day bond repurchase rate jumped 42.21 basis points to 3.4676 percent from 3.0455 percent at the close on Wednesday.
The 14-day repo rate rose to 4.3598 percent from 4.1923 percent, while the overnight rate climbed to 2.6565 percent from 2.3039 percent.
Dealers say the overnight rate -- which is still low by historical standards -- has room to rise further, possibly topping out at around 3.0 percent around year-end.
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