China's money rates mixed, liquidity adequate

Thu Nov 29, 2012 11:10pm EST

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* 7-day repo rate up 3.84 bps to 3.3737 pct
    * Cash demand during month-end increasing dealer caution
    * Dealers expect fall in money rates due to fiscal deposits

    By Chen Yixin and Pete Sweeney
    SHANGHAI, Nov 30 (Reuters) - China's shortest overnight
money rates edged down on Friday, but seven- and 14-day rates
gained slightly as caution over month-end cash demand prevailed.
    Banks often keep more cash on hand at the end of each month
in order to meet the regulatory loan-to-deposit ratio, currently
standing at 75 percent, which is measured at month end.
    The benchmark weighted-average seven-day bond repurchase
rate rose 3.84 basis points to 3.3737 percent from
3.3353 percent at the close on Thursday.
    The 14-day repo rate rose to 3.4973 percent
from 3.4250 percent, and the one-day repo rate 
fell to 2.2649 percent from 2.3237 percent.
    Dealers expected rates to fall slightly in coming weeks as
fiscal deposits are converted into base money, injecting cash
into the system.
    A Reuters analysis shows that the Ministry of Finance is
likely to pump a record-high 1.6 trillion yuan ($256.90
billion)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. 
    In the bond market, interest rate swaps (IRS) were little
changed on Friday, with one-year IRS dipping at
3.36 percent, from Thursday's close of 3.34 percent, while the
benchmark five-year IRS inched up to 3.60 percent
from 3.57 percent.
     In the past two weeks IRS rates jumped, showing that not
only have investors given up on the prospect of interest rate
cuts in the near term, they have little confidence that there
will be more cuts forthcoming in 2013. 
    
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.3737     3.3353    + 3.84
7-day SHIBOR           3.8256     3.8210    + 0.46  
 Note: Repo rate is weighted average.
     
($1 = 6.2281 Chinese yuan)

 (Editing by Kim Coghill)
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