PBOC halts repos as money rate rises
The People's Bank of China has refrained from selling repurchase agreements for the first time in four months as banks' hoarding of cash to meet regulatory requirements drove the benchmark money-market rate to a seven-week high.
The People's Bank of China has refrained from selling repurchase agreements for the first time in four months as banks' hoarding of cash to meet regulatory requirements drove the benchmark money-market rate to a seven-week high.
The central bank's decision to halt the use of repurchase agreements resulted in a net 12 billion yuan (HK$15.08 billion) being added to the financial system this week via its open-market operations, data shows. It also auctioned 50 billion yuan of three-month treasury deposits at 3.8 per cent, the lowest rate since September 2012.
The seven-day repurchase rate, a gauge of interbank funding availability, climbed 0.13 percentage point to 3.6 per cent in Shanghai yesterday. That was the highest since May 4.
The rate increased 42 basis points in the past week as banks boosted cash balances to meet quarter-end regulatory limits.
"The seasonal factor inevitably is going to drive tighter liquidity in the next few days but the overall liquidity conditions will remain accommodative for the foreseeable future," said Becky Liu, a rates strategist at Standard Chartered. "Actual lending conditions remain very difficult."
Growth in local government debt had eased, the National Audit Office reported on Tuesday, a sign that tighter scrutiny on borrowing and an economic slowdown have curbed credit.
The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, slipped one basis point to 3.54 per cent, according to data. That compares with this year's average of 4.19 per cent.
The yield on the government's 4.42 per cent bonds due March 2024 increased two basis points to 4.07 per cent, according to data from the National Interbank Funding Centre.
