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Andrew Galbraith

China central bank steps up liquidity support for more banks after Baoshang takeover

Jun 06 2019

SHANGHAI Boosting liquidity to the financial system on Thursday, China's central bank signaled its readiness to supply smaller banks with a steady stream of cash after the takeover of a troubled lender, letting more banks access the funds.

GLOBAL MARKETS-Asian shares fall on weak data as focus shifts to rate cuts

Jun 04 2019

SHANGHAI, June 4 Asian shares fell on Tuesday as weak economic indicators and an intensifying Sino-U.S. trade war inflamed concerns about global growth, supporting safe-haven assets such as bonds.

GLOBAL MARKETS-Asian shares fall as weak data inflames growth fears

Jun 03 2019

SHANGHAI, June 4 Asian shares fell on Tuesday, following a volatile Wall Street session as weak economic indicators and an intensifying Sino-U.S. trade war inflamed concerns about global growth, supporting safe-haven assets such as bonds.

GLOBAL MARKETS-Asian shares edge up but growth worries cap gains

Jun 03 2019

SHANGHAI, June 4 Shares in Asia inched higher and safe-haven assets gave up some overnight gains on Tuesday, as investors paused for breath after a volatile Wall Street session, but deeper concerns about growth have capped broader improvements in risk sentiment.

China central bank urges calm after Baoshang takeover

Jun 02 2019

SHANGHAI China's central bank sought to calm investors on Sunday after last month's takeover of Inner Mongolia-based Baoshang Bank, saying regulators are not planning any more such moves for the moment.

After Baoshang rescue, China central bank pours cash into banking system

May 29 2019

SHANGHAI China's central bank made its biggest daily net fund injection into the banking system in more than four months on Wednesday, a move traders saw as an attempt to calm the money market after the rescue of a troubled bank.

UPDATE 1-China's money rates jump after Baoshang Bank takeover stokes liquidity fears

May 28 2019

(Recasts, adds analyst comments in paragraphs 7-11) By Andrew Galbraith and Winni Zhou SHANGHAI, May 28 China's primary money rates rose on Tuesday as market sentiment remained fragile after the takeover by regulators of a troubled regional bank, heralding a possible weakening of small banks' ability to access interbank funding. The People's Bank of China (PBOC) vowed on the weekend to offer liquidity support to Inner Mongolia-based Baoshang Bank after regulators took it over, citing serious credit risks posed by the lender. While the central bank kept pumping liquidity into financial system, interbank rates stayed up on worries about broader contagion risks. The PBOC injected a net 70 billion yuan ($10.14 billion) through its regular open market operations on Tuesday, following on from the previous day's 80 billion yuan net cash injection. "The Baoshang incident is pressuring short-term liquidity," said a trader at a Chinese bank. "Along with month-end seasonal factors, cash conditions are becoming tighter and pushing up the near-date swap points higher. And that has led the swap curve moving upward." Chinese liquidity conditions typically tighten at month-end as cash demand rises due to factors including bank requirements for funds to meet regulatory requirements such as loan-to-deposit ratios. Ji Tianhe, China rates and FX strategist at BNP Paribas in Beijing, said that the takeover of Baoshang could be interpreted as a "marginal targeted deleveraging" campaign, and could change the ecosystem of the interbank market. "Smaller banks are supposed to serve the real economy, but some turned out be very active in interbank trading in order to expand their size. Now this latest move is pushing similar small lenders back to their core business," Ji said. He added that as small banks are not allowed to borrow in the exchange market and have to largely rely on bigger banks for interbank funding, "they are now facing a challenging funding situation." Fitch Ratings downplayed the effect of the Baoshang takeover on interbank rates, but said that the regulatory seizure indicated general weakness among China's smaller lenders. "We believe the government's propensity to support small banks is lower than for the large state banks, while the impact that a small bank failure would have on market confidence is untested," the rating agency said in a statement. On Tuesday, 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 2.8489%. That was 7.66 basis points higher than the previous day's closing average rate, and up more than 30 basis points from the previous week's close of 2.5469%. The Shanghai Interbank Offered Rate (SHIBOR) for the same tenor rose to 2.8230%, up 11.20 basis points from the previous close, and 23.1 basis points from Friday's closing rate. The one-day or overnight rate stood at 2.8000% and the 14-day repo stood at 3.0695%. The takeover of Baoshang Bank had jolted markets on Monday, leading to a rise in yields on some banks' negotiable certificates of deposit, a popular short-term interbank debt instrument. The spread between low-rated 3-month NCDs and their AAA rated equivalents widened by 4.57 basis points on Tuesday, according to Refinitiv data. Analysts at OCBC bank said in a note on Tuesday that the takeover had sparked a sell-off in Chinese sovereign bonds on Monday after reports that corporate deposits and interbank liabilities over 50 million yuan could be subject to a haircut of 20%-30%, "due to concern about the possible break of implicit guarantee." "This may cause interbank lenders to reassess their relationship with the smaller lenders," the analysts said. On Tuesday, treasury futures rebounded from what market watchers viewed as an overcorrection, with the most-traded contract, for September delivery, climbing as much as 0.37%. "Futures took off as soon as the big banks started buying," said a Shanghai-based trader at an Asian bank. Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.8000 2.6678 +13.22 0.00 Seven-day 2.8489 2.7723 +7.66 0.00 14-day 3.0695 2.8444 +22.51 0.00 Shanghai stock exchange repo market Overnight 1.5500 1.9050 -35.50 655,931.8 0 Seven-day<CN7DR 2.8750 3.0100 -13.50 83,505.10 PO=SS> 14-day 2.7500 2.7400 +1.00 9,488.30 PBOC Guidance Rates Overnight 2.8200 2.6800 +14.00 <CN1DRPFIX=CFXS > Seven-day 3.0000 2.8000 +20.00 <CN7DRPFIX=CFXS > 14-day 3.3500 2.8500 +50.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.7600 2.6660 +9.40 Seven-day 2.8230 2.7110 +11.20 Three-month 2.9150 2.9040 +1.10 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 = 6.9039 Chinese yuan) (Reporting by Andrew Galbraith and Winni Zhou Editing by Shri Navaratnam)

China's money rates rise after Baoshang Bank takeover stokes liquidity worries

May 28 2019

By Andrew Galbraith and Winni Zhou SHANGHAI, May 28 China's primary money rates rose on Tuesday as market sentiment remained fragile after the takeover by regulators of a troubled regional bank. The People's Bank of China (PBOC) vowed on the weekend to offer liquidity support to Inner Mongolia-based Baoshang Bank after regulators took it over, citing serious credit risks posed by the lender. While the central bank kept pumping liquidity into financial system, interbank rates stayed up on worries about broader contagion risks. The PBOC injected a net 70 billion yuan ($10.14 billion) through its regular open market operations on Tuesday, following on from the previous day's 80 billion yuan net cash injection. "The Baoshang incident is pressuring short-term liquidity," said a trader at a Chinese bank. "Along with month-end seasonal factors, cash conditions are becoming tighter and pushing up the near-date swap points higher. And that has led the swap curve moving upward." Chinese liquidity conditions typically tighten at month-end, triggered by factors including bank requirements for funds to meet regulatory requirements such as loan-to-deposit ratios. On Tuesday, 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 2.8489%. That was 7.66 basis points higher than the previous day's closing average rate, and up more than 30 basis points from the previous week's close of 2.5469%. The Shanghai Interbank Offered Rate (SHIBOR) for the same tenor rose to 2.8230%, up 11.20 basis points from the previous close, and 23.1 basis points from Friday's closing rate. The one-day or overnight rate stood at 2.8000% and the 14-day repo stood at 3.0695%. The takeover of Baoshang Bank had jolted markets on Monday, leading to a rise in yields on some banks' negotiable certificates of deposit, a popular short-term interbank debt instrument. The spread between low-rated 3-month NCDs and their AAA rated equivalents widened by 4.57 basis points on Tuesday, according to Refinitiv data. Analysts at OCBC bank said in a note on Tuesday that the takeover had sparked a sell-off in Chinese sovereign bonds on Monday after reports that corporate deposits and interbank liabilities over 50 million yuan could be subject to a haircut of 20%-30%, "due to concern about the possible break of implicit guarantee." "This may cause interbank lenders to reassess their relationship with the smaller lenders," the analysts said. On Tuesday, treasury futures rebounded from what market watchers viewed as an overcorrection, with the most-traded contract, for September delivery , climbing as much as 0.37%. "Futures took off as soon as the big banks started buying," said a Shanghai-based trader at an Asian bank. Key money rates at a glance: Volume-wei Previous Change (bps) Volume ghted day (%) average rate (%) Interbank repo market Overnight 2.8000 2.6678 +13.22 0.00 Seven-day 2.8489 2.7723 +7.66 0.00 14-day 3.0695 2.8444 +22.51 0.00 Shanghai stock exchange repo market Overnight 1.5500 1.9050 -35.50 655,931.8 0 Seven-day<CN7DR 2.8750 3.0100 -13.50 83,505.10 PO=SS> 14-day 2.7500 2.7400 +1.00 9,488.30 PBOC Guidance Rates Overnight 2.8200 2.6800 +14.00 <CN1DRPFIX=CFXS > Seven-day 3.0000 2.8000 +20.00 <CN7DRPFIX=CFXS > 14-day 3.3500 2.8500 +50.00 <CN14DRPFIX=CFX S> SHANGHAI INTERBANK OFFERED RATE Overnight 2.7600 2.6660 +9.40 Seven-day 2.8230 2.7110 +11.20 Three-month 2.9150 2.9040 +1.10 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 = 6.9039 Chinese yuan) (Reporting by Andrew Galbraith and Winni Zhou Editing by Shri Navaratnam)

GLOBAL MARKETS-China gains, auto sector lift Asian shares, but sentiment fragile

May 28 2019

* Analysts see widespread uncertainty, continued risk aversion

GLOBAL MARKETS-Asian equities buoyed by China, auto merger but gains capped

May 28 2019

* Analysts see widespread uncertainty, continued risk aversion

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