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Money market rates ease after liquidity input
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The money market rates eased in China yesterday after the central bank injected liquidity through normal channels for the first time in three weeks.
The seven-day Shanghai Interbank Offered Rate, a key measure of fund availability in the banking system, shed 264.6 basis points to 6.197 percent, below its five-day average.
The seven-day bond repurchase rate shed 239 basis points to 6.51 percent yesterday.
Yesterday the People’s Bank of China added 29 billion yuan (US$4.7 billion) into the market through seven-day reverse repurchase operations for the first time in three weeks.
The PBOC injected 300 billion yuan via short-term liquidity operations for three days in a row last week. Still money rates soared to the highest since June last Friday as banks amassed cash to meet year-end regulatory requirements.
“One of the reasons behind the recent cash squeeze is slower fiscal spending,” Hong Kong-based Shen Minggao, China chief economist at Citigroup Global Markets Asia Ltd, said in Shanghai yesterday. “Fiscal deposits were 23 percent more by the end of November compared to last year.”
He projected the liquidity crunch will ease and funding costs will fall after the week-long Spring Festival which starts on January 31, 2014. Funding costs will range between 5 and 6 percent after the holiday.
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