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Bill sale indicates delay in rate rise
By Leo Zhang |
April 22, 2010, Thursday
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Online Edition
Online Edition
CHINA'S central bank today sold three-year bills at a lower rate thanks to strong demand from banks, reducing the possibility that it would resort to raising banks' reserve requirements and interests rates in the near term.
The 90-billion-yuan (US$13.2 billion) debt was sold at a yield of 2.74 percent on the interbank market, compared with 2.75 percent at the last sale on April 8, when the People's Bank of China issued 15 billion yuan worth of three-year bills.
The central bank has mopped up a cumulative 65 billion yuan of liquidity from the country's financial markets this week, compared with 14 billion yuan last week, according to data complied by Bloomberg.
"As banks' credit extension is restricted under the current scenario, the larger size of issuance was designed to meet market demand," said Li Huaiding, an analyst with Guosen Securities. "The yields on central bank bills won't likely rise in the short term."
China's banking regulator on Tuesday told larger banks to conduct quarterly stress tests on property loans and ensure the risks attached to such lending is strictly controlled after the government tightened credit rules to crack down on real-estate speculation.
Authorities have already started to curb mortgages to multiple-home purchases and increased down-payment requirements after housing prices soared 11.7 percent last month from a year earlier, the most since records started in 2005.
The issuing of yuan-backed new credit in China fell further in March to 510.7 billion yuan (US$74.82 billion), compared with February's 700.1 billion yuan. Economists have expected the central bank to hike banks' reserve requirements and even interest rates as early as this quarter.
The central bank early this year raised commercial banks' reserve ratio twice by a combined 1 percentage point as part of efforts to tame inflation. Consumer prices increased 2.4 percent year on year last month, down from a 2.7 percent rise in February.
"After intense polices to curb speculation in the property market, authorities may slow the tightening pace to gauge the market response," said Liu Yu, an Orient Securities trader. "The central bank is not likely to raise interest rates before April's economic data are unveiled."
The 90-billion-yuan (US$13.2 billion) debt was sold at a yield of 2.74 percent on the interbank market, compared with 2.75 percent at the last sale on April 8, when the People's Bank of China issued 15 billion yuan worth of three-year bills.
The central bank has mopped up a cumulative 65 billion yuan of liquidity from the country's financial markets this week, compared with 14 billion yuan last week, according to data complied by Bloomberg.
"As banks' credit extension is restricted under the current scenario, the larger size of issuance was designed to meet market demand," said Li Huaiding, an analyst with Guosen Securities. "The yields on central bank bills won't likely rise in the short term."
China's banking regulator on Tuesday told larger banks to conduct quarterly stress tests on property loans and ensure the risks attached to such lending is strictly controlled after the government tightened credit rules to crack down on real-estate speculation.
Authorities have already started to curb mortgages to multiple-home purchases and increased down-payment requirements after housing prices soared 11.7 percent last month from a year earlier, the most since records started in 2005.
The issuing of yuan-backed new credit in China fell further in March to 510.7 billion yuan (US$74.82 billion), compared with February's 700.1 billion yuan. Economists have expected the central bank to hike banks' reserve requirements and even interest rates as early as this quarter.
The central bank early this year raised commercial banks' reserve ratio twice by a combined 1 percentage point as part of efforts to tame inflation. Consumer prices increased 2.4 percent year on year last month, down from a 2.7 percent rise in February.
"After intense polices to curb speculation in the property market, authorities may slow the tightening pace to gauge the market response," said Liu Yu, an Orient Securities trader. "The central bank is not likely to raise interest rates before April's economic data are unveiled."
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