SHANGHAI, Jan 23: China’s money rates were little changed on Wednesday, but market players expect they could rebound next week due to an increase in cash demand at month-end and around the Chinese New Year.
Cash demand typically rises during the holidays as firms pay staff annual bonuses and shoppers withdraw money for celebrations.
‘Conditions are still good, but we can clearly feel that money demand is rebounding,’ said a dealer at a state-owned bank in Beijing.
‘Rates have hovered around low levels for a while, so a little bit of a bounce is reasonable.’
But market participants expect to sail through the month-end and holiday periods smoothly due to expectations that the central bank will keep the money rates stable using open market operations.
The People’s Bank of China has consistently auctioned seven-day, 14-day, and 28-day reverse bond repurchase agreements on Tuesdays and Thursdays to inject liquidity since mid-2012.
In addition to these measures, the PBOC announced last week that it will now permit 12 primary dealers, including most large- and mid-sized Chinese banks, to bid for shorter-term reverse repos every day of the week.
That will increase the central bank’s flexibility in managing short-term liquidity.
The benchmark weighted-average seven-day bond repurchase rate fell two basis points to 2.96 percent from 2.98 percent at the close on Tuesday.
The 14-day repo rate edged up to 2.95 percent from 2.92 percent, and the one-day repo rate inched up to 1.95 percent from 1.93 percent.
(AGENCIES)
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