December 7, 2018 / 8:15 AM / 4 days ago

China's money rates fall on easing demand; PBOC skips OMOs for 5th week

    SHANGHAI, Dec 7 (Reuters) - China's primary money rates fell
this week as demand for cash for regular tax payments eased
after the month end, with traders awaiting November credit data
for potential clues on further policy easing.    
    The country's central bank made no net injections or drains
into money markets for a record fifth consecutive week.
    While skipping daily reverse repurchase operations, the
People's Bank of China effectively rolled over 187.5 billion
yuan ($27.26 billion) worth of maturing one-year medium-term
lending facility (MLF) loans on Thursday.
    It issued the same amount of loans at the same interest
rate, 3.30 percent.
    On Friday, the volume-weighted average rate of the benchmark
seven-day repo traded in the interbank market,
considered the best indicator of general liquidity in China, was
2.5575 percent. 
    That was 12 basis points (bps) lower than the previous
week's closing average rate of 2.6778 percent.
    The Shanghai Interbank Offered Rate (SHIBOR) for the same
tenor rose to 2.6110 percent, 5.8 bps below the previous week's
close of 2.6690 percent.
    The one-day or overnight rate stood at 2.3944 percent and
the 14-day repo stood at 2.4135 percent.
    "Credit growth is not that strong ... so it's not like
there's a huge demand for credit," said Albert Leung, a rates
strategist at Nomura in Hong Kong. He characterised money market
rates as "quite stable."
    "Generally speaking credit growth, aggregate financing is
weak," contributing to ample money market liquidity, he said.
    China's Ministry of Finance gave a small boost to liquidity
levels on Friday, albeit at a higher rate, with the auction of
100 billion yuan ($14.53 billion) worth of one-month fiscal
deposits at an average yield of 4.02 percent.
    It was the first time the ministry had auctioned one-month
deposits, and compares with an average 3.71 percent yield on
three-month deposits auctioned in September.
    Leung attributed the higher rate to the relatively small
size of the auction, and to banks taking the opportunity to
seize short-term funding that crosses into 2019 to help cover an
expected rise in year-end demand. 
    Credit data in the coming week is expected to show new bank
loans in China likely rebounded in November after a sharp drop
the previous month, a Reuters poll showed, as the government
sought to keep liquidity ample to support the slowing
economy.
    Money supply growth likely remained at a record low,
however, while outstanding loan growth may have eased slightly
for a second month, reinforcing views that the central bank will
have to ease policy further in coming months. 
    Markets will be looking for signs in the data of whether
recent policy loosening measures have been effective in
stimulating loan demand, particularly from smaller, private
companies which account for a large share of China's jobs. A
multi-year clampdown on shadow banking has squeezed a
significant funding channel for those firms.
    
 Key money rates at a glance:
  
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  average                                            
                  rate (%)                                           
 Interbank repo market
 Overnight        2.3944      2.4021      -0.77                      0.00
                                                                     
                                                                     
 Seven-day        2.5575      2.4966      +6.09                      0.00
                                                                     
                                                                     
 14-day           2.4135      2.3845      +2.90                      0.00
                                                                     
                                                                     
 Shanghai stock exchange repo market
 Overnight        2.8800      2.3650      +51.50                     645,019.9
                                                                     0
                                                                     
 Seven-day<CN7DR  2.5800      2.5700      +1.00                      59,637.30
 PO=SS>                                                              
 14-day           2.7250      2.6250      +10.00                     18,655.50
                                                                     
                                                                     
 PBOC Guidance Rates
 Overnight        2.4200      2.4200      +0.00                      
 <CN1DRPFIX=CFXS                                                     
 >                                                                   
 Seven-day        2.6100      2.6000      +1.00                      
 <CN7DRPFIX=CFXS                                                     
 >                                                                   
 14-day           2.5000      2.4500      +5.00                      
 <CN14DRPFIX=CFX                                                     
 S>                                                                  
 SHANGHAI INTERBANK OFFERED RATE
 Overnight        2.4160      2.4180      -0.20                      
                                                                     
 Seven-day        2.6110      2.6000      +1.10                      
                                                                     
 Three-month      3.1360      3.1330      +0.30                      
                                                                     
 
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=        0.0000               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 = 6.8786 Chinese yuan renminbi)


($1 = 6.8830 Chinese yuan renminbi)

    
 (Reporting by Andrew Galbraith; Editing by Kim Coghill)
  
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