China’s short-term money rates jump on tighter month-end cash conditions

SHANGHAI, Nov. 30 (Reuters) – China’s short-term money market rates soared on Tuesday amid tightening liquidity in money markets as financial institutions scramble for liquidity to meet month-end administrative requirements.

The volume-weighted average of seven-day repos traded on the interbank market rose more than 12 basis points to 2.3732%, the highest level since September 29.

The volume-weighted overnight repo traded in the interbank market jumped about 32 basis points to 2.1801%, the highest since October 19.

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The rise in money market rates also comes as sentiment in global bond markets has turned lukewarm, while Chinese assets have remained largely muted amid uncertainty over the new variant of the Omicron coronavirus.

Some traders have said that non-bank financial institutions, such as brokerage houses, have to pay a cost of borrowing of around 10% for overnight repos traded in the interbank money market, because large public banks, a key source of funds, were unwilling to lend.

The People’s Bank of China (PBOC) injected net 50 billion yuan through reverse repurchases into the banking system earlier in the session, but the cash injection did little to ease tensions.

Meanwhile, local governments have been rushing to sell their so-called special bonds, which mainly finance infrastructure projects, to meet a Tuesday deadline for this year’s special bond issuance, the ministry said. finances. Read more

A total of 204.98 billion yuan ($ 32.17 billion) of local government bonds is due to be sold on Tuesday, according to official data compiled by Reuters, the highest one-day issue of that debt this year.

China has set an annual quota of 3.6 trillion yuan for issuing special bonds by local governments this year.

But Ming Ming, head of bond research at CITIC Securities, expects money markets to stabilize in December.

“Structural tools such as re-lending will be the key tools of monetary policy, while the central bank would rely mainly on open market operations and loans from the Medium-Term Loan Facility (MLF) for maintain reasonably abundant liquidity, ”he said.

A 950 billion yuan batch of MLF is expected to expire in mid-December.

($ 1 = 6.3724 Chinese yuan)

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Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim Coghill and Ana Nicolaci da Costa

Our Standards: Thomson Reuters Trust Principles.

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