SHANGHAI, Oct 29 : China’s money market rates jumped on Monday, with the benchmark seven-day repo rate hitting a five-week high as corporates moved to pay their three-quarter income tax by Wednesday.
But traders said that as the payment deadline is near, money rates should have now reached their peaks and will begin falling in early November.
The weighted averages seven-day bond repurchase rate jumped 52.7 basis points to 4.2454 percent from 3.7184 percent at the close on Friday.
The 14-day repo rate rose to 4.7721 percent from 3.8178 percent, and the overnight one-day repo rate
Shot up to 4.4582 percent from 3.4668 percent.
Liquidity will remain loose for most parts of November and December partly because the Ministry of Finance usually injects 1 to 2 trillion yuan ($160 to $320 billion) into the banking system over these two months to refund a portion of corporate income taxes pre-paid earlier in the year.
There are also signs that China’s economy may have hit bottom, so traders said they now expect the People’s Bank of China (PBOC) may not need to ease monetary policy by another cut in banks’ required reserve ratio (RRR).
‘Corporate have almost paid their third-quarter income taxes, so money rates should fall in early November after a few days of recovery of banks’ liquidity,’ said a dealer at a major Chinese bank in Beijing.
‘Overall liquidity conditions will not be tight in the next two months, and even if the PBOC needs to ease policy to support the economy, an RRR cut is not likely until late December.’
Money rates have staged a roller-coaster performance so far this month, with the seven-day repo rate falling to as low as 2.67 percent earlier before the corporate tax payments set in.
In the latest sign that the growth rate of the world’s second-largest economy may be ending a downward slide, China’s industrial profits rose 7.8 percent in September from a year earlier, the National Bureau of Statistics said on Saturday. That compared with a 6.2 percent drop in August.
China’s annual growth rate has fallen for seven consecutive quarters. For July to September, gross domestic product (GDP) expanded 7.4 percent from a year ago, in line with forecasts of economists polled by Reuters.
(agencies)
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