China's money rates steady as PBOC keeps supply balanced

Thu Nov 29, 2012 12:30am EST

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* 7-day repo rate falls 2.16 bps to 3.3338 pct
    * PBOC drains weekly net 40 billion yuan via OMOs
    * But dealers said little impact on money market

    By Pete Sweeney and Chen Yixin
    SHANGHAI, Nov 29 (Reuters) - China's money rates held firm
on Thursday as the People's Bank of China's (PBOC) slight drain
of funds for the week through open market operations kept money
supply in a stable balance.
    China's central bank injected 214 billion yuan ($34.36
billion) into the money markets through reverse bond repurchase
agreements this week.
    Including maturing bonds and reverse repos, this meant the
bank drained a marginal net 40 billion yuan from the market for
the week. 
    Dealers said small drains of funds had little impact on
borrowing conditions, and pointed to high levels of fiscal
deposits as keeping fund supply loose.
    A Reuters analysis shows that the Ministry of Finance is
likely to pump a record high 1.6 trillion yuan into the system
in the last two months of this year through the transfer of tax
revenues out of the central bank and into commercial banks.
 
    "There is little change today in the money situation. My
feeling is the central bank's slight drain of funds is a signal
that it wants to keep money supply stable," said a dealer at an
Asian bank in Shanghai. 
    Dealers added that willingness to lend funds had decreased
slightly because of a spike in money demand at the month-end.   
    The benchmark weighted-average seven-day bond repurchase
rate dipped 2.16 basis points to 3.3338 percent
from 3.3554 percent at the close on Wednesday.
    The 14-day repo rate rose slightly to 3.4276
percent from 3.3609 percent, and the one-day repo rate
 inched down to 2.3223 percent from 2.3262 percent.
    In the bond market, interest rate swaps (IRS) were also
little changed. One-year IRS was at 3.34 percent by
midday, down slightly from Wednesday's close of 3.35 percent,
while the benchmark five-year IRS dipped to 3.59
percent from 3.61 percent.
    
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.3338     3.3554   - 2.16
7-day SHIBOR           3.3408     3.3617   - 2.09  
 Note: Repo rate is weighted average.
     
($1 = 6.2273 Chinese yuan)

 (Editing by Kim Coghill)
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