SHANGHAI, Sept 5: China’s money rates continued to ease on Thursday on ample liquidity, ignoring the central bank’s decision to drain funds from the market for the first time in four months via open market operation.
China’s central bank drained a net 37 billion yuan from the market this week, the first time it has done so since May, but dealers reported little impact on trading given the relatively small size of the drain.
‘Money is ample, and the small drain from the open market is not having a big impact,’ said a dealer at a state-owned bank in Beijing.
He and several other dealers pointed out that the amount of funds injected or drained during open market operations had become less important than official guidance rates set for reverse repos.
Traders say that despite commitments to increasing transparency, the central bank has quietly tightened its grip on the money market after a cash crunch in June startled investors at home and abroad.
The benchmark seven-day bond repurchase contract fell 3 basis points (bps) to 3.46 percent from 3.49.
The weighted-average 14-day rate fell 5 bps to 3.68 percent from 3.73 percent, while the overnight repo rate dropped 11 bps to 2.90 percent.
(agencies)
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