SHANGHAI, Aug 10: China’s key money rate rose slightly on Friday on expectations that the People’s Bank of China (PBOC) will continue to use reverse repos to balance market liquidity.
The benchmark seven-day repo rate was at 3.3041 percent at midday, inching up from 3.2927 at Thursday’s close, while the overnight rate rose 6.36 basis points to 2.6681 percent.
The 14-day rate fell 9.23 bps to 3.2478 percent from 3.3401 percent on Thursday.
‘Now the PBOC is just using reverse repos to balance market levels, and no other funds have moved into the market, so the money rates have not moved sharply recently,’ said a dealer at a Chinese bank in Beijing.
Dealers said that the reverse repo rates have been tracking the benchmark rate for ordinary seven day repos.
China’s central bank injected 50 billion yuan into the money markets through seven-day reverse bond repurchase agreements at a yield of 3.35 percent on Thursday.
Market players widely expect the central bank to cut banks’ reserve requirement ratio (RRR) in August.
However, some dealers said the PBOC might wait until September in order to head off the traditional quarter-end funding squeeze as banks stockpile cash on expectations of heavier customer withdrawals and to meet required regulatory thresholds.
Current Prev close Change
(pct) (bps) 7-day repo 3.3041 3.2927
+1.14 7-day SHIBOR 3.3000 3.6099
1.17 Note: Repo rate is weighted average.
($1 = 6.3615 Chinese yuan)
(agencies)
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