December 20, 2012 / 5:46 AM / 5 years ago

China's money rates jump on year-end cash demand

* Benchmark 7-day repo rate jumps 42 bps to 3.4676 pct
    * Banks start to put money aside for year-end money demand
    * injected 92 bln yuan via open market operations
    * Short rates could rise further before year-end

    By Chen Yixin and Gabriel Wildau
    SHANGHAI, Dec 20 (Reuters) - China's money rates jumped on
Thursday, with dealers saying that  year-end cash demand was
crimping market liquidity, despite a net injection of funds by
the central bank this week.
     Cash demand typically rises at year-end, as households and
firms draw on deposits to pay for bonuses and holiday shopping.
    "Actually, the monetary conditions have not really
tightened, but many banks have started to put money aside for
year-end, and no one wants to lend funds," said a dealer at a
state-owned bank in Beijing. 
    The People's Bank of China (PBOC) conducted a net injection
of 92 billion yuan ($14.77 billion) into the banking system this
week, according to Reuters' calculations, its largest net
injection in eight weeks. 
    "When the market really needs money, injections only have a
small impact on conditions," said the state-owned bank dealer.
    The benchmark weighted-average seven-day bond repurchase
rate jumped 42.21 basis points to 3.4676 percent
from 3.0455 percent at the close on Wednesday.
    The 14-day repo rate rose to 4.3598 percent
from 4.1923 percent, while the overnight rate 
climbed to 2.6565 percent from 2.3039 percent.
    Dealers say the overnight rate -- which is still low by
historical standards -- has room to rise further, possibly
topping out at around 3.0 percent around year-end.
                                 Current  Prev close  Change
                                       (pct)           (bps)  
7-day repo         3.4676     3.0455    + 42.21
7-day SHIBOR           3.4500     3.0430    + 40.70
 Note: Repo rate is weighted average.
($1 = 6.2303 Chinese yuan)

 (Editing by Jacqueline Wong)

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