SHANGHAI, Mar 11: China’s benchmark money rate rose on Monday while other rates fell as dealers awaited a clear signal from the central bank’s open market operations on Tuesday.
The seven-day repo rate was quoted at 2.9914 percent at midday, up over 50 basis points from Friday. But the overnight repo rate fell by 22.14 bps to 2.2293 percent while the 14-day repo also declined by 7.48 bps to 2.7601.
The People’s Bank of China has ceased using short-term reverse repos to inject funds and has instead consistently drained funds every week since markets reopened after the week-long Spring Festival holiday.
In the last two weeks it has drained 5 billion yuan ($804.54 million) every week. So far open market operations in 2013 have resulted in a net drain of 558 billion yuan.
This caused a temporary panic in the market in mid February, as some investors believed that rising real estate prices had finally provoked China to begin systematically tightening up the money supply.
But those fears now appear baseless, and since then rates have fallen back to under 3 percent – which dealers say indicates accommodative territory – thanks to the injection of liquidity through other channels.
Officials have said that foreign hot money inflows resumed in January, and at the same time the PBOC has injected yuan into the interbank market as a result of efforts to hold the yuan exchange rate back, with an eye on the plummeting Japanese yen.
‘The money market isn’t even remotely nervous today,’ said a trader at a bank in Beijing.
‘The seven day repo rate went up a bit, but that’s just because it slid too far down on Friday.’ (AGENCIES)
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