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Liquidity to improve after a month-end squeeze amid IPOs
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CHINA’S money rates rose last week as initial public offers and month-end factors tightened liquidity, but gains were capped as the central bank injected more funds into the market, traders said.
The weighted average of the benchmark seven-day bond repurchase agreement stood at 3.64 percent on Friday, edging up 25.01 basis points from a week before.
Ten companies opened IPO subscriptions on Thursday and Friday, which is expected to lock up as much as 1 trillion yuan (US$162.69 billion) of funds until earlier this week. Month-end factors also put pressure on cash demand, traders said, as Chinese banks typically need more funds to meet regulatory requirements such as loan-to-deposit ratios at the end of the month.
The People’s Bank of China has also increased the liquidity supply last week, injecting a total of 105 billion yuan into the money markets via open market operations and deposit auctions.
After last week’s operation, the central bank has now injected a net 24 billion yuan of money so far this year, the first time in 2014 the figure has turned positive, as it continues to ensure sufficient liquidity in the system amid signs of slowing economic growth.
Traders expect liquidity conditions to improve from next month as the central bank is expected to stick to its targeted monetary policy.
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