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Interbank fund rates climb on need for cash
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China’s interbank money rates rose yesterday despite the central bank’s injection of 300 billion yuan (US$49.1 billion) last week because banks need to amass cash to meet year-end regulatory requirement.
The seven-day Shanghai Interbank Offered Rate, a key measure of fund availability in the market, jumped 118.9 basis points to 8.843 percent yesterday. The gauge has soared 448.5 basis points since last Monday.
The seven-day bond repurchase rate added 129 basis points to 8.89 percent yesterday. The seven-day repo rate hit 10 percent last Friday, the highest level since June, implying that another cash squeeze may occur near the year-end.
The People’s Bank of China said on its official weibo account last Friday that it had injected 300 billion yuan worth of liquidity into the market for three consecutive days last week through short-term liquidity operations.
The PBOC said there’s ample liquidity in the market and major commercial banks should adjust their balance sheets and improve liquidity management.
“Excess reserves in the banking system stood at more than 1.5 trillion yuan at a high level by historical standards,” the PBOC said.
Excess reserves are cash above the reserve requirement that banks hold in their accounts at the central bank.
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