IRS up on sign of liquidity tightening policies

SHANGHAI, Feb 28:  Most of China’s money market rates rose on Thursday after the People’s Bank of China (PBOC) refrained from injecting liquidity into the market, traders said.

The central bank neither drained nor injected funds into the money market in regular weekly open market operations on Thursday, confounding widespread expectations that it would inject cash into the market due to a liquidity squeeze, which have seen money rates surge to high levels this week.

‘There had been many lending offers before the operations, but disappointment after the PBOC’s refusal to inject liquidity largely soaked up such offers,’ said a trader at an Asian bank in Shanghai.

‘Although the PBOC move may not yet be ready for a monetary tightening, it has nevertheless given indications of official concerns over excessive liquidity supply that may fan inflation.’

The benchmark weighted-average seven-day bond repurchase rate edged higher to 4.28 percent from an already high level of 4.27 percent at the close on Wednesday.

The 14-day repo rate rose to 4.87 percent from 4.84 percent, and the one-day repo rate advanced to 4.03 percent from 3.96 percent.

In the interest-rate markets, interest rate swap (IRS) rates rose on signs of that official will move to tighten liquidity . One-year IRS rose to 3.23 percent from Wednesday’s close of 3.16 percent, while the benchmark five-year IRS advanced to 3.64 percent from 3.61 percent. (AGENCIES)

 

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