SHANGHAI: China's key money rates fell 27 basis points on Wednesday to a 13-month low as ample cash on hand at banks depressed demand for interbank loans.
Dealers said liquidity remained ample following China's latest 50 bps cut in required reserve ratios (RRR), so banks had little need to tap the market. A low opening persuaded other dealers to follow suit, several dealers said.
"Nobody is lacking money," said a dealer at a state-owned bank in Shanghai. "So money demand is not strong. We just follow the first quote at the beginning of trade open."
She said heightened month-end fund demand could cause some volatility in money rates over the next week, but upward pressure should be mild.
Banks often keep more cash on hand at the end of each month in order to meet the regulatory loan-to-deposit ratio, set at 75 percent.
The benchmark weighted-average seven-day bond repurchase rate slumped 26.75 basis points to 2.4267 percent, its lowest point since April 2011.
The 14-day money rate was little changed at 2.7574 percent at midday, while the overnight rate inched up 2.69 bps to 1.8563 percent.
Interest rates swaps (IRS) rose slightly, with benchmark five-year IRS rising by around 2 bps to 3.0 percent and one-year IRS rsing to 2.72 percent from Tuesday's 2.78 percent.
Dealers said they expect the government to use stimulus policy to bolster growth as China's economy cools.