SHANGHAI, Aug 28: China’s money rates were mixed on Wednesday, with ample supply of short-term funds helping to offset seasonal demand at month-end, when banks need more cash to meet regulatory requirements such as the 75 percent loan-to-deposit ratio.
Liquidity was abundant after the injection of short-term funds from both the People’s Bank of China (PBOC) and the Ministry of Finance on Tuesday. Traders expect liquidity to remain relatively good in the near term.
However, the PBOC has re-issued three-year bills outside normal open market operations four times since July in order to lock up longer-term funds, a sign that authorities continue to implement a policy of keeping money-market liquidity relatively tight, traders said.
‘The market is worried that only short-term money supply is good and that the PBOC could shift to tighter liquidity any time it wants,’ said a trader at a major Chinese state-owned bank in Shanghai.
‘We have money but we are just cautious not to lend too aggressively.’
The benchmark weighted-average seven-day bond repurchase rate rose four basis points to 4.29 percent on Wednesday.
The overnight rate added nine bps to 3.11 percent, but the 14-day rate tumbled 24 bps to 5 percent.
Traders said they expected money rates to retreat next week, with the seven-day repo rate likely falling back to the range of 3-4 percent in which it has mostly moved this year.
(AGENCIES)
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