Money rates fall as PBOC injects funds
Print Edition
China’s money market rates fell yesterday after the central bank again injected funds through open market operations to pump up liquidity and guide interest rates downward.
The benchmark weighted-average seven-day bond repurchase rate fell 74 basis points to 3.15 percent yesterday, down from the previous close of 3.89 percent.
The overnight rate lost 12 basis points to 3.18 percent, while the 14-day rate edged down by 3 basis points to 4.62 percent.
The People’s Bank of China injected 15 billion yuan (US$2.43 billion) by issuing 14-day reverse bond repurchase agreements yesterday.
The central bank has injected a net 20 billion yuan into the market this week.
The auction rate on the 14-day reverse repos was 4.10 percent on average, down 40 basis points from 4.50 percent last week. Additionally, the reverse repos issued by the central bank on Tuesday received an average auction rate of 4 percent, also down 40 basis points from a week earlier.
Analysts said the falls signaled that the central bank intends to guide money market rates lower and keep them stable in the near term.
“Liquidity will gradually return to a neutral level in the third quarter,” China Galaxy Securities said in a latest research note. “Banks have made adjustments in liquidity management and asset allocation after a comprehensive review of the cash squeeze in June, which is expected to take effect in at least three months.”
A cash squeeze in China’s interbank market in late June sent money market rates racing above records. The conditions have been easing since July and the phenomenon is unlikely to repeat in future, Wei Zhen, a fund manager at Bosera Asset Management Co, suggested in a note yesterday.
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