SHANGHAI, Mar 25: China’s primary money rates fell over the course of the week as the central bank injected the most funds for a fortnight through open market operations, and onshore markets shrugged off a report of potential repayment problems at Bohai Steel.
The benchmark seven-day repo’s volume weighted average rate, considered the best indicator of general liquidity in China, traded at 2.2840 percent in the interbank market, down four basis points (bps) on the week. The Shanghai Interbank Offered Rate (SHIBOR) for same tenor rose to 2.3000 percent, flat on the week.
The one-day or overnight rate stood at 1.9694 percent, down three basis points for the week, and the 14-day repo stood at 2.6912 percent.
In the bond market, onshore yields were largely steady and showed little reaction to the news that Tianjin government owned Bohai Steel Group Co Ltd was facing repayment difficulties on 192 billion yuan ($29.46 billion) of debt. On Saturday, the financial magazine Caixin reported that the Tianjin government had set up a committee of creditors to help resolve the issue. “This week the money market has been pretty relaxed,” said a trader at a Chinese commercial bank in Shanghai. “The central bank added a fair amount of liquidity and so you might see a bit of a pull-back next week, but probably nothing severe. On the bond market, we don’t see many opportunities in corporate debt right now. The news on Bohai Steel may influence the prices of bonds from some excess capacity industries like steel and coal, but probably won’t affect other corporate debt much.” Chinese fixed income markets have been relatively stable since late February, with the central bank continuing to conduct open market operations nearly every business day. Money market rates spiked ahead of the Chinese New Year in late January, but have been much more stable since, particularly after the central bank’s latest cut to bank reserve requirement ratios on February 29. Analysts say the weaker dollar since late January has also reduced pressure on the central bank to defend the currency by selling foreign exchange assets, meaning easier conditions in the domestic money market as well. Chinese foreign exchange reserves fell by $30 billion in February, the slowest fall since November and a fraction of January’s $100 billion decrease. (AGENCIES)
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