SHANGHAI, Apr 12: China’s money rates dropped on Friday on ample liquidity in the market after better-than-expected credit growth in March, but the fall could be limited as demand for cash picks up for tax payments, traders said.
The benchmark seven-day bond repurchase rate dropped 7.65 basis points to 2.95 percent by midday, while the overnight rate slipped 4.45 bps to 2.02 percent and the 14-day rate fell 9.76 bps to 3.1 percent.
Data published on Wednesday showed Chinese banks extended 1.06 trillion yuan ($171.2 billion) of new local currency loans in March, well above market expectations for 850 billion yuan and sharply higher than the previous month.
The broad money supply (M2) rose 15.7 percent last month from a year earlier, the People’s Bank of China said in a statement on its website, www.Pbc.Gov.Cn, overshooting market expectations of a 14.6 percent rise.
Traders said markets will see major cash outflows in April and May as companies make tax payments. In those two months last year, firms paid a combined 700 billion yuan ($113 billion) in taxes, according to a Reuters calculation based on official data.
‘While liquidity will remain adequate, coming tax payments may cap further falls in money rates,’ said a dealer at a Chinese brokerage in Shanghai.
(agencies)
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