China's money rates flat, PBOC asks demand of repos

* 7-day repo rate rises 2.34 bps to 3.6578 pct
* PBOC may skip bill sales, but asks demand of repos
* Market players expect net drain next week
* Premier Wen says to start policy fine-tuning in Q1

SHANGHAI, Feb 13 (Reuters) - China's money rates
traded narrowly on Monday, with dealers citing ample liquidity
in the banking system, but a potential net drain in funds this
week kept the market cautious.
China's central bank did not ask banks about their demand
for bills but inquired about demand for bond repurchase
agreements, or repos, meaning there is a large possibility that
funds will be drained from the market this week.
Seven billion yuan in Chinese central bank bills are due to
mature this week, although no repos are due to mature.
"Although the market is not lacking in money, rates have
little potential to fall sharply as many banks have to make
payments," said a dealer at a Chinese commercial bank in
Shanghai. "Also, the central bank could drain money from the
market this week."
Indeed, small- and medium-sized banks will have to meet
payments for reserve requirement ratios on Feb. 15.
The benchmark weighted-average seven-day bond repurchase
rate rose 2.34 basis points to 3.6578 percent from
3.6344 percent at the close on Friday.
The 14-day repo rate rose to 3.8498 percent
from 3.8482 percent, and the shortest overnight one-day repo
rate rose to 2.7005 percent from 2.6344 percent.
In the bond market, interest rate swaps (IRS) fell on
expectations of a greater possibility policy will be loosened
after Premier Wen Jiabao said in remarks published by state
media on Monday that China would start to fine-tune its economic
policies in the first quarter.
One-year IRS was at 3.19 percent, unchanged
from Friday's close, while the benchmark five-year IRS
fell to 3.30 percent from 3.33 percent.

Current Prev close Change
(pct) (bps)
7-day repo 3.6578 3.6344 +2.34
7-day SHIBOR 3.6515 3.6408 +1.07
Note: Repo rate is weighted average.

($1 = 6.30 Chinese yuan)