SHANGHAI, March 27 China's benchmark money rate
rose steeply on Thursday morning after the central bank
conducted an unexectedly large cash drain during open market
operations, adding pressure to cash demand as banks sequester
funds for quarter-end payments.
The seven-day bond repurchase agreement opened at
4.80 percent on Thursday, up nearly a percentage point from
Wednesday's close of 3.89 percent, after the People's Bank of
China (PBOC) drained 98 billion yuan from the interbank market.
That quote remained the only one on the board at time of
reporting, however, and traders warn that the opening
transaction does not always set the tone for the day.
It was the highest opening quote since Feb. 13.
Other key rates were also up on open, but to a lesser
degree, with the overnight repo at 2.64 percent from
2.51 and the 14-day repo at 5.2 percent from 4.99
percent at the end of Wednesday.
"While the central bank continues to withdraw liquidity from
the market and today's repo is bigger than expected, the overall
liquidity conditions before the quarter-end are quite relaxed,"
wrote Zhou Hao, economist at ANZ Bank in Shanghai, in a research
note Wednesday morning.
"We do see many big banks offering money in the market. This
could be due to central bank's large unsterilised FX purchase
and de-leveraging in the off-balance-sheet activities."
Cash demand from banks and their corporate customers tends
to increase toward the end of a fiscal quarter as banks
sequester funds to meet regulatory requirements and corporates
brush up their balance sheets for stockholder reports.
(Reporting by Pete Sweeney; Editing by Kim Coghill)