March 23, 2018 / 8:04 AM / 4 months ago

China money rates fall on ample liquidity, market unfazed by c.bank move

    SHANGHAI, March 23 (Reuters) - China's primary money rates
fell this week on ample liquidity in the banking system,
shrugging off a slight increase in short-term rates by the
central bank following the Federal Reserve's hike in U.S. ones.
    The People's Bank of China's (PBOC) move was a reminder
Beijing is keeping an eye on global market trends even as it
cracks down on financial risks at home.
    The PBOC increased the rate on seven-day reverse repurchase
agreements by 5 basis points (bps) to 2.55 percent. 
    On Friday, fears of a trade war between the world's two
largest economies jolted China's equity, bond and commodity
markets.
    In the money market, the volume-weighted average rate of the
benchmark seven-day repo, considered the best
indicator of general liquidity in China, was 2.7100 percent on
Friday afternoon, around 10 basis points lower than the previous
week's closing average rate of 2.8071 percent. 
    Traders said the PBOC's rate hike move was widely expected,
and market sentiment was not affected.
    Cash conditions were loose this week, prompting the central
bank to drain a net 320 billion yuan ($50.58 billion) in its
open market operations.
    The PBOC, in a statement, attributed the high liquidity to
rising fiscal expenditure at the end of the month to absorb
maturing reverse repos.
    Traditionally, the Ministry of Finance's distribution of
funds to firms and individuals who benefit from government
programmes is larger in the last month of each quarter, lifting
banking system deposits. 
    Some market participants said that based on current
conditions, they were not too worried about liquidity at the end
of the month when financial institutions will face a quarterly
health check led by the central bank.
    The Shanghai Interbank Offered Rate (SHIBOR) for the
seven-day tenor was at 2.8464 percent on Friday, around 2 basis
points lower than the week-earlier fix at 2.8650 percent. 
    
Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.5364      2.5134      +2.30                      0.00
                                                                     
                                                                     
 Seven-day        2.7100      2.7603      -5.03                      0.00
                                                                     
                                                                     
 14-day           4.6151      4.7751      -16.00                     0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        3.2650      2.8650      +40.00                     327,638.0
                                                                     0
                                                                     
 Seven-day<CN7DR  4.3950      3.6700      +72.50                     43,843.60
 PO=SS>                                                              
 14-day           4.2000      4.5200      -32.00                     4,472.90
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.5600      2.5500      +1.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        2.9000      3.0000      -10.00                     
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           4.8000      5.0000      -20.00                     
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.5450      2.5490      -0.40                      
                                                                     
 Seven-day        2.8464      2.8538      -0.74                      
                                                                     
 Three-month      4.6489      4.6621      -1.32                      
                                                                     
 
KEY INTEREST RATE SWAPS:
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
                                                 rate*
 2 yr IRS based on 1   CNABAD2YF=        0.0000              -1.5
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.8000               n/a
 
*This spread can be seen as a proxy for forward-looking market
expectations of an interest rate cut or rise

    
China FX and money market guide: 
 China debt market guide:
 SHIBOR rates:
 Reports on central bank open market operations:
 New Chinese debt issues:
 Prices for central bank bills, treasury bonds and sovereign
bonds:
 Overview of China financial market data:

($1 = 6.3272 Chinese yuan)

    
 (Reporting by Winni Zhou and John Ruwitch; Editing by Richard
Borsuk)
  
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