China’s money rates rise on month-end sea­sonal fac­tors

EU de­mands soar, de­spite crit­i­ciz­ing Trump’s en­ergy stance

Global Times US Edition - - BIZMARKETS -

Driven by sea­sonal fac­tors, China’s pri­mary money mar­ket rates were up slightly last week, de­spite the cen­tral bank’s net in­jec­tion of funds.

The vol­ume-weighted av­er­age rate of the bench­mark seven-day repo traded in the in­ter­bank mar­ket, con­sid­ered the best in­di­ca­tor of gen­eral liq­uid­ity in China, was 2.7855 per­cent last Fri­day, around 2 ba­sis points higher than the pre­vi­ous week’s clos­ing av­er­age rate of 2.7683 per­cent.

Cash con­di­tions had a slightly tight­en­ing bias for the past week, which was caused by month-end de­mand from banks for funds to meet reg­u­la­tory re­quire­ments, a trader at a Chi­nese bank in Shang­hai said, not­ing the cen­tral bank was keen to keep the over­all liq­uid­ity “not too loose, not too tight.”

Over the past week, the Peo­ple’s Bank of China (PBC) in­jected a net 280 bil­lion yuan ($41.50 bil­lion) into the mar­ket via its re­v­erse bond re­pur­chase agree­ments, down from a net in­jec­tion of 510 bil­lion yuan a week ear­lier.

The weekly net cash in­jec­tion was lower be­cause 138.5 bil­lion yuan worth of medi­umterm lend­ing fa­cil­ity ( MLF) loans ma­tured last Mon­day, drain­ing cash out of the mar­ket.

The PBC in­jected 360 bil­lion yuan worth of MLF loans ear­lier this month to off­set a to­tal of 357.5 bil­lion yuan worth of MLF loans that ma­tured this month.

Some traders say they are not par­tic­u­larly op­ti­mistic for cash con­di­tions in early Au­gust be­cause of the ma­tur­ing of large num­bers of re­v­erse re­pos.

Ma­tur­ing PBC re­v­erse bond re­pur­chase agree­ments are set to drain 750 bil­lion yuan out of the mar­ket this week, ac­cord­ing to Reuters’ cal­cu­la­tions.

Some mar­ket watch­ers said the PBC has man­aged bank­ing sys­tem liq­uid­ity through­out July by “cut­ting the peaks to fill in the val­leys.”

They noted that the au­thor­i­ties in­jected funds to en­sure liq­uid­ity when some tem­po­rary and sea­sonal fac­tors weighed on the mar­ket, but kept over­all con­di­tions steady be­cause sta­bil­ity and delever­ag­ing in the fi­nan­cial mar­kets were top pri­or­i­ties for this year.

Larry Hu, head of China eco­nomics at Mac­quarie Se­cu­ri­ties in Hong Kong, ex­pects liq­uid­ity con­di­tions to im­prove in the sec­ond half of this year.

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