SHANGHAI, June 5: China’s money rates rose slightly and hovered around high levels on Wednesday, reflecting strong fund demand in advance of a holiday next week, dealers said.
Dealers said there was huge cash demand ahead of the Dragon Boat Festival, for which the interbank market will be closed from Monday through Wednesday. Banks usually prepare liquidity in the run-up to such holidays to meet spot cash demand, putting temporary upward pressure on rates.
Regular payments into banks’ reserve accounts at the central bank to meet the required reserve ratio (RRR) also contributed to Wednesday’s strong cash demand.
‘Big banks are not willing to lend funds, so money is quite tight in the market,’ said a dealer at a city bank in Shanghai.
The benchmark weighted-average seven-day bond repurchase rate rose by three basis points to 4.77 percent around midday.
The overnight rate rose by 14 basis points to 4.68 percent, while the 14-day rate gained 7 basis points to 4.90 percent.
Beyond temporary factors, the rise in rates in recent days has sparked market worries that the People’s Bank of China is ‘fine-tuning’ the interbank market.
The central bank has been draining funds to put upward pressure on rates as part of a campaign to slow unhealthy forms of credit growth that appear to be fueling financial speculation rather than real investment. (AGENCIES)
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