SHANGHAI, Nov 23 (Reuters) - China's key 7-day money rate

fell to its lowest level in over a month, shrugging off the

central bank's slight drain of funds through open market

operations, as traders said fiscal deposits entering the system

were pumping in significant liquidity.

The benchmark weighted-average seven-day bond repurchase

rate dropped 39.50 basis points to 2.8375 percent

from 3.2325 percent at the close on Thursday, marking its lowest

level since Oct 22.

Though the central bank drained a net 24 billion yuan ($3.85

billion) from the banking system for the week through open

market operations, some traders pointed to large fiscal deposits

keeping money supply loose.

A Reuters analysis shows that the Ministry of Finance is

likely to draw on deposits of government revenues to pump a

record high 1.6 trillion yuan into the system in the last two

months of this year.

'Fiscal deposits have become a major factor to influence the

central bank's monetary policy as well as money markets,' said a

senior trader at a Chinese state-owned bank in Beijing.

Plentiful money supply has meant that since the start of

November, borrowing rates have generally held at a low level,

within a narrow trading range between 3.000 and 3.300 percent.

'There is little demand for borrowing. Banks and

institutions have enough funds, so the rates stay low and

stable,' said a trader at a large state-owned bank in Beijing.

The trader added that holding the official rate steady on

reverse repos issued by the central bank - which the spot rate

tends to follow closely - could also help restrain rates.

The 14-day repo rate climbed slightly to

3.5209 percent from 3.5008 percent, and the one-day repo rate edged down to 2.2616 percent from 2.3211 percent.

Longer-term tenors remained tighter as traders pointed to an

annual spike in demand at the end of the year. The 28-day rate did edge down slightly to 4.000 from 4.0017, but

held above its 28-day moving average.

Traders added that rate movements still depended on what the

central bank did in its twice-weekly open market operations.

'It is hard to say if there will be any increase in

volatility, it really depends on open market operations. But I

wouldn't expect sharp moves in the coming days,' said a trader

at Chinese commercial bank in Beijing.

Current Prev close Change

(pct) (bps)

7-day repo 2.8375 3.2325 - 39.50

7-day SHIBOR 2.8467 3.2183 - 37.16

Note: Repo rate is weighted average.

To see stories on China's debt issue

For prices for central bank bills, treasury bonds and

sovereign bonds, please click,

To see a general guide to contributed price data,

news and analysis, please click

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($1 = 6.2289 Chinese yuan)

(Reporting by Chen Yixin and Shanghai Newsroom; Editing by Pete

Sweeney and Eric Meijer)

Keywords: MARKETS CHINA BONDS/

(pete.sweeney@thomsonreuters.com)(+86 21 6104 1777 / +86 158 0188 9934)(Reuters Messaging: pete.sweeney.thomsonreuters.com@reuters.net)

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