SHANGHAI, Apr 10: China’s money rates were mixed on Wednesday as a recent slowdown of capital inflows – illustrated by March’s trade deficit – was offset by the system’s still-abundant liquidity and optimism over future supply, traders said.
The benchmark seven-day bond repurchase rate dropped nearly 7 basis points to 3.2 percent by midday, while the overnight rate slipped 2 bps to 2.13 percent but the 14-day rate rose 8 bps to 3.23 percent.
China reported a trade deficit of $884 million in March as a forecast-busting 14.1 percent year-on-year surge in imports eclipsed export growth of 10 percent.
‘Money supply still slightly exceeds demand for now,’ said a trader at a Chinese commercial bank in Shanghai.
‘This is a continuation of general easy money conditions in the markets this year, supported by a willingness to lend based on optimism over future supply, partly from the central bank,’ the trader said.
On Tuesday, the People’s Bank of China (PBOC) injected a net 11 billion yuan ($1.8 billion) into the markets through open market operations. According to Reuters calculations based on official data, another 105 billion yuan worth of central bank bills are set to mature in April, which will also inject funds.
However, the markets will see major cash outflows in April and May as companies make tax payments, traders said. In those two months last year, firms paid a combined 700 billion yuan in taxes, Reuters calculated based on official data.
(AGENCIES)
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