November 10, 2017 / 9:17 AM / a year ago

China's money rates rise as drains liquidity

    SHANGHAI, Nov 10 (Reuters) - China's primary money market
rates moved higher on Friday, in spite of a central bank
liquidity injection, as cash conditions tightened ahead of
business tax payments and the week brought a net liquidity
     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 2.9438
    That was 20.5 basis points higher than the closing average
rate the previous Friday,  and up more than 4 basis points from
one day earlier. 
    The seven-day Shanghai Interbank Offered Rate (SHIBOR) rose
to 2.8455 percent, up 2 basis points from last Friday's close.
    The People's Bank of China (PBOC) drained a net 230 billion
yuan ($34.64 billion) from the market this week, following a
drain of 110 billion yuan a week earlier.
    However, an 80 billion yuan injection on Friday helped to
keep conditions from becoming excessively tight, traders said.
    "Liquidity conditions were very tight Friday morning, but we
saw a turn for the better just before noon," said a
Shanghai-based trader at a regional bank. "We had a net
injection for the day, and in the afternoon bigger banks came
out to lend to their peers."
    The one-day or overnight rate stood at 2.7381 percent and
the 14-day repo stood at 3.9336 percent, up 18.9 basis points on
the week.
    The tightness in money markets this week came as yields on
Chinese government bonds remained near three-year highs, and as
companies prepare to pay business taxes that start coming due in
    The yield on Chinese 10-year treasury bonds was
3.916 late Friday. Analysts say recent gains reflect selling by
market participants preparing for expected regulatory tightening
following the 19th Party Congress.
    Data released Thursday that showed higher-than-expected
inflation in October added to the upward pressure.
    "Recently some buying has helped to stabilise the markets.
But looking at the longer term, rates may still move higher,"
said David Qu, markets economist at ANZ in Shanghai.     
    The spread of the five-year credit default swap rate on
Chinese sovereign debt fell 0.41 percent to

 Key money rates at a glance:
                  Volume-wei  Previous    Change (bps)               Volume
                  ghted       day (%)                                
                  rate (%)                                           
 Interbank repo market
 Overnight        2.7381      2.6630      +7.51                      0.00
 Seven-day        2.9438      2.9026      +4.12                      0.00
 14-day           3.9336      3.8172      +11.64                     0.00
 Shanghai stock exchange repo market
 Overnight        4.6600      3.0850      +157.50                    700,802.0
 Seven-day<CN7DR  3.8500      3.5200      +33.00                     61,595.10
 14-day           4.0350      3.7950      +24.00                     20,959.50
 PBOC Guidance Rates
 Overnight        2.7500      2.6500      +10.00                     
 Seven-day        3.4400      3.4000      +4.00                      
 14-day           4.0000      3.8000      +20.00                     
 Overnight        2.7170      2.6460      +7.10                      
 Seven-day        2.8455      2.8110      +3.45                      
 Three-month      4.4747      4.4568      +1.79                      
 Instrument            RIC         Rate          Spread vs 1 yr
                                                 official deposit
 2 yr IRS based on 1   CNABAD2YF=        0.0000              -1.5
 year benchmark                                  
 5 yr 7-day repo swap  CNYQB7R5Y=        3.9400               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
 Overview of China financial market data:

($1 = 6.6401 Chinese yuan)

 (Editing by Richard Borsuk)
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