Reuters: Financial Services and Real Estate: China key money rate up as banks set aside cash

Reuters: Financial Services and Real Estate Reuters.com is your source for breaking news, business, financial and investing news, including personal finance and stocks. Reuters is the leading global provider of news, financial information and technology solutions to the world's media, financial institutions, businesses and individuals. // via fulltextrssfeed.com

China key money rate up as banks set aside cash May 3rd 2012, 06:36 Tweet Share this Email Print Thu May 3, 2012 2:36am EDT * Temporary cash demand due to extra reserve requirements * PBOC uses reverse repos to inject money into market * Injects 117 bln yuan this week including maturing bills * Appears reluctant to cut reserve ratios immediately By Lu Jianxin and Pete Sweeney SHANGHAI, May 3 (Reuters) - China's seven-day repo rate edged higher on Thursday as banks set aside money to meet reserve requirements, but the rise was capped by central bank cash injections, traders said. The one-day bond repurchase rate also edged, up as banks set aside cash to cover reserve requirements on increased deposits at the end of April. The 14-day rate fell on expectations that liquidity conditions will improve after the May 5 deadline has passed, traders said. The People's Bank of China (PBOC) injected 65 billion yuan ($10.3 billion) into the banking system via seven-day reverse repos in its open market operations on Thursday, it said in a statement. The fund injection came on top of the 52 billion yuan in central bank bills due to mature this week. Assuming the central bank does not conduct unscheduled open market operations on Friday, the PBOC will inject a total of 117 billion this week, compared with 64 billion yuan last week. "These injections are purely aimed at ironing out short-term cash demand derived from the extra reserve requirements," said a dealer at a Chinese state-owned bank in Shanghai. "But the super-short tenor in the reverse repos may also indicate that the PBOC has no intention to cut bank reserve requirement ratios (RRR) immediately." The weighted average of the benchmark seven-day repo rate rose to 3.8499 percent from Wednesday's close of 3.8069 percent. The one-day rate advanced to 2.9648 percent from 2.8481 percent, but the 14-day repo rate fell to 3.8364 percent from 3.9267 percent. The market has been expecting the PBOC to ease monetary policy in response to a slowing of the economy since the fourth quarter. But Beijing has remained wary of premature easing in the face of sustained inflation and uncertainty in overseas markets. The PBOC cut deposit reserve requirement ratios for commercial banks twice in November and February, injecting about 800 billion yuan into the market. It also injected cash into the markets in 11 out of the 16 weeks this year, a net injection of 363 billion yuan into the banking system. But traders said these steps were very mild in terms of monetary easing. "Our view is for seven-day repo fixings to edge lower, closer to 3 percent than 4 percent and our economist looks for a 50-basis point RRR cut as early as this month," said Wee-Khoon Chong, a fixed income strategist at Societe Generale in Hong Kong. "CNY IRS remains very sticky on the upside. We do not expect a break on the upside and we maintain our receive IRS strategy for CNY IRS." Chinese interest rate swaps were unchanged on Thursday as market players do not believe the PBOC will change its interest rate policy any time soon. The benchmark five-year IRS were unchanged at 3.39 percent at midday, while the 10-year IRS were also flat 3.50 percent. Current Prev close Change (pct) (bps) 7-day repo 3.8499 3.8069 + 4.30 7-day SHIBOR 3.8529 3.8000 + 5.29 Note: Repo rate is weighted average. ($1 = 6.3 Chinese yuan) Tweet this Link this Share this Digg this Email Reprints Comments (0) This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

You are receiving this email because you subscribed to this feed at blogtrottr.com. If you no longer wish to receive these emails, you can unsubscribe from this feed, or manage all your subscriptions