SHANGHAI, July 23: Most Chinese money rates rose on Monday after the central bank refrained from cutting banks’ reserve requirement ratios (RRR) despite widespread hopes that it would do so over the weekend.
Traders expect the People’s Bank of China (PBOC) to announce an RRR cut soon. Chinese banks have stepped up lending in response to a government appeal to help stabilise slowing economic growth, pressuring liquidity, they said.
Money supply will also be capped by the 100 billion yuan ($15.69 billion) worth of reverse bond repurchase agreements maturing this week, as well as cash calls to meet regulatory requirements for the end of a month, including the 75-percent loan-to-deposit ratio.
The overnight repo rate jumped to 3.3396 percent from 3.1388 percent, the 14-day repo rate rose to 3.9355 percent from 3.8235 and the 21-day repo rate climbed to 4.1315 from 4.0130 percent.
The benchmark seven-day weighted average bond repurchase rate slipped to 3.5697 percent at midday from Friday’s close of 3.5814 percent after posting a rise of nearly five basis points in reaction to apparent monetary tightening by the central bank last week.
China’s economy has slowed sharply this year, posting GDP growth of 7.6 percent in the second quarter, its slowest expansion in more than three years.
The PBOC has cut banks’ RRR twice, in February and May, and reduced official interest rates twice – in June and July.
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China’s four biggest state-run banks doubled their pace of lending in the first half of July from a month earlier, the state-run Shanghai Securities News said on Thursday, after senior officials, including Premier Wen Jiabao, called on all citizens to help stabilise the economic growth.
Also this month, China’s five biggest lenders distributed a combined 209.1 billion yuan ($32.81 billion) in cash dividends to shareholders from last year’s net profits.
Aggravating already tight conditions, China’s 2,000-plus listed companies have entered the interim results reporting season and firms have begun paying income taxes from their first-half earnings.
The PBOC has used reverse repos to help supply short-term cash to the market, but these reverse repos usually mature within one or two weeks, causing cash to flow out again.
(agencies)
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