SHANGHAI, Oct 25: China’s money rates jumped again on Thursday, with the benchmark seven-day repo rate rising 50 basis points as company tax payments put pressure on the money supply, dealers said.
Market participants also pointed to a net drain in open market operations as a further reason for tightening conditions in the market.
The PBOC conducted a net drain of 70 billion yuan ($11.20 billion) from the banking system via open market operations this week, according to Reuters’ calculations.
‘Today’s money is tight because of the tax payments,’ said a dealer at a state-owned bank in Shanghai. ‘Also, the central bank has drained funds from market again this week.’
She said that liquidity pressure in the market could ease off next week as banks increased their demand for reverse repos.
‘This Tuesday, most of us did not expect that money would be so tight, so the demand for reverse repos was low, which also led to a net drain for this week,’ said the state-owned bank dealer.
‘So, now that the market can fully see the liquidity situation, demand next week should be high and money supply should be eased.’
The benchmark weighted-average seven-day bond repurchase rate jumped 49.18 basis points to 3.6595 percent from 3.1677 percent at the close on Wednesday. It’s the first day in two weeks where the seven-day repo rate is higher than the central bank’s rate 3.35 percent for the same tenor.
The 14-day repo rate rose to 3.6721 percent from 3.5329 percent.
The overnight one-day repo rate fell to 2.7324 percent from 2.8153 percent.
(agencies)
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