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China's longer-term money rates rise on year-end demand
December 18, 2012 / 4:41 AM / in 5 years

China's longer-term money rates rise on year-end demand

* Shorter-term rates flat, longer tenors rise
    * Year-end demand creates upward pressure
    * Bankers see monetary easing in 2013 - PBOC
    * But IRS rise, suggests easing unlikely

    By Adam Jourdan
    SHANGHAI, Dec 18 (Reuters) - China's key seven-day money
rate inched down on Tuesday, while 14- and 28-day tenors rose
sharply as traders said cash demand for the year-end period was
pushing up longer-term rates.
    The benchmark weighted-average seven-day bond repurchase
rate fell 2.57 basis points to 3.0053 percent from
3.0310 percent at the close on Monday.
    Borrowing conditions have remained loose this week,
prompting the People's Bank of China (PBOC) to make only minor
adjustments through open market operations.
    The central bank injected 75 billion yuan ($12.03 billion)
through seven- and 28-day reverse repos on Tuesday.
    Meanwhile, maturing central bank reverse repos will drain a
net 102 billion yuan for the week, down from last week's 262
billion yuan and the lowest level since mid-August. 
    The 14-day repo rate jumped to 3.7431 percent
from 3.1037 percent, while the 28-day rose to
4.4691 from 4.1738 percent.
    The shortest one-day repo rate was virtually
flat at 2.2892 percent from 2.2659 percent.
    According to a central bank survey, a growing number of
bankers are expecting monetary policy to ease in the first
quarter of 2013. 
    But in the bond market, interest rate swaps (IRS), which
price the market's expectation for the future price of money,
show little support for the thesis. 
    Monetary easing expectations put downward pressure on IRS
contracts, but since a low in mid-July, one-year 
and five-year IRS have steadily risen, and were
both up around midday against Monday's close.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.0053      3.0310    - 2.57
7-day SHIBOR           2.9990      3.0185    - 1.95  
 Note: Repo rate is weighted average.
($1 = 6.2350 Chinese yuan)

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