China's key money rate falls near 10-month low

China's central bank drained 20 billion yuan ($3.2 billion)from the money markets through 91-day bond repurchase agreements on Thursday, meaning it drained a net 57 billion yuan from the market this week.

The benchmark weighted-average seven-day bond repurchase rate fell 12.19 basis points to 2.8820 percent by midday, near a 10-month low struck earlier this week.

The 91-day repo yield fell 2 pips to 3.14 percent, the first fall in seven months, boosted by strong demand on abundant liquidity.

"The 91-day result was lifted by strong demand, with ample money," said a dealer at a Chinese bank in Shanghai. "But the yield does not fall sharply, so it has little impact on our trading."

Meanwhile, the 14-day repo rate eased to 2.9862 from Wednesday's 3.0642, while the one-day repo edged up 3.73 bps to 2.3591 percent.

Dealers said they widely expected money rates would hovered around recent levels for a while.

Interest rate swaps were little changed on Thursday, as market players were cautious.

"February data shows the domestic economy is slowing, so the market is quite cautious," said a dealer at a Chinese bank in Shanghai. "But, in the short term, the biggest impact on the IRS is market liquidity."

Copyright Reuters, 2012