China's cbank in­jects most cash in seven weeks

The Pak Banker - - COMPANIES/BOSS -

China's cen­tral bank added the most money to the fi­nan­cial sys­tem through open-mar­ket op­er­a­tions this week since be­fore last month's Lu­nar New Year holiday as a con­vert­ible bond sale and lenders' quar­ter-end de­posit needs spurred de­mand for funds.

The Peo­ple's Bank of China in­jected a net 180 bil­lion yuan ($27.6 bil­lion), the most since the pe­riod ended Feb. 5, data com­piled by Bloomberg show. A March 18 bond sale by Jiangsu Jiang­nan Wa­ter Co. locked up an es­ti­mated 200 bil­lion yuan, ac­cord­ing to Huachuang Se­cu­ri­ties Co. Com­mer­cial lenders need de­posits at the end of each quar­ter to meet reg­u­la­tory checks, while in­ter­bank bor­row­ing costs tend to rise in the March-April pe­riod as banks lodge tax pay­ments with the PBOC. The bench­mark seven-day money rate climbed to a six-week high on March 23 be­fore re­treat­ing.

"The mar­ket was a bit tight ear­lier this week, when the money was frozen due to con­vert­ible bond sales - it then eased since Thurs­day on ac­cu­mu­la­tive PBOC in­jec­tions," said Lin Yi­jian, an an­a­lyst at Guangzhou Ru­ral Com­mer­cial Bank Co. "The mar­ket will face the chal­lenge for quar­ter-end de­mand next week, but the cen­tral bank will step up in­jec­tions if nec­es­sary."

The PBOC auc­tioned 30 bil­lion yuan of seven-day re­verse-re­pur­chase agree­ments on Fri­day, the small­est daily of­fer­ing this week, and kept the in­ter­est rate un­changed at 2.25 per­cent. Re­verse re­pos to­taled 380 bil­lion yuan for the week, while 200 bil­lion yuan of such con­tracts ma­tured, data shows.

The seven-day repo rate, a gauge of in­ter­bank fund­ing avail­abil­ity, fell two ba­sis points to 2.29 per­cent as of 4:30 p.m. in Shang­hai, ac­cord­ing to a weighted av­er­age from the Na­tional In­ter­bank Fund­ing Cen­ter. The cen­tral bank has re­stricted the one-week in­ter­bank bor­row­ing cost to be­tween 2.25 per­cent and 2.5 per­cent over the past five months, us­ing the meas- ure to in­di­cate to the mar­ket where it wants in­ter­est rates to be. The PBOC has been con­duct­ing open-mar­ket op­er­a­tions daily since Jan. 29 in an ef­fort to strengthen its in­flu­ence on in­ter­est rates. The cost of one-year in­ter­est-rate swaps, the fixed pay­ment to re­ceive the float­ing seven-day repo rate, rose two ba­sis points from a week ear­lier to 2.30 per­cent on Fri­day.

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