SHANGHAI, Apr 2: China’s money rates were little changed on Tuesday, as the market shrugged off a mild drain of funds by the central bank amid signs of strong foreign exchange inflows.
The benchmark weighted-average seven-day bond repurchase rate was at 3.41 percent, essentially unchanged from Monday’s close.
The overnight repo rate edged up by 2 basis points to 2.02 percent – still a very low level by historical standards.
The seven-day rate has risen steadily from a recent low of 2.49 percent on March 6 to 3.44 percent on Friday, driven by the traditional quarter-end liquidity squeeze in which banks scramble to attract deposits to enhance their quarterly financial statements.
Rates have remained near that level this week in advance of the two-day Tomb Sweeping Day holiday that begins on Thursday. Banks typically prepare extra liquidity to meet customer cash withdrawals during national holidays.
The People’s Bank of China (PBOC) has now conducted net liquidity withdrawals from interbank market for seven consecutive weeks, but the amounts have been moderate. The PBOC conducted a net 30 billion yuan withdrawal this week, down from 57 billion yuan withdrawn last week.
Traders say the moderate withdrawals are aimed at sterilizing a portion of the liquidity created by strong foreign exchange inflows in the early months of the year, rather than an effort to make conditions substantially tighter.
Concerns that spiked in late February and early March about aggressive tightening by the central bank appear to have waned. One-year interest-rate swaps were quoted at 3.23 percent near midday, implying that the market believes the seven-day repo rate will fall from its current level over the next year.
(agencies)
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