By Gabriel Wildau
SHANGHAI, Jan 4 (Reuters) - China's money rates dropped
sharply on Friday, as year-end cash demand waned and the market
anticipated a possible fund injection by the central bank on
The benchmark seven-day weighted-average repo rate fell 54 basis points to 4.04 percent near midday.
The overnight rate tumbled to 2.56 percent
from 3.86 percent at the close on Monday, the last trading
session prior to the three-day New Year holiday.
The People's Bank of China (PBOC) surveyed banks about
demand for five-day reverse bond repurchase agreements that
would be auctioned on Saturday, if demand is sufficient.
The central bank normally auctions seven-day repos on
Tuesdays and Thursdays. The unusual five-day tenor this weekend
is designed to allow the instrument to mature next Thursday, the
same day as if a seven-day reverse repo had been auctioned on
Thursday this week, when the market was closed for the New Year
The PBOC sometimes chooses not to proceed with an auction
even after it has surveyed demand. But traders say that while
conditions have eased since Monday, several banks are still
likely to report sufficient liquidity demand to PBOC for the
auction on Saturday to go forward.
'There will be demand for five-day cash, but it won't be
especially strong,' said a trader at an Asian bank in Shanghai.
The seven-day rate hovered around 3 percent for most of last
month until Dec 20, when the traditional year-end squeeze pushed
the rate up, peaking at 4.58 percent on the last day of the
year. A rate below 3 percent is generally seen as indicating
Looking forward, traders say that while rates may slide a
bit further early next week, they are likely to remain elevated
through the start of the Spring Festival holiday, which starts
on Feb. 9.
Current Prev close Change
7-day repo 4.0418 4.5826 -54.08
7-day SHIBOR 4.0480 4.5800 -53.20
Note: Repo rate is weighted average.
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($1 = 6.23 Chinese yuan)
(Editing by Jacqueline Wong)
Keywords: MARKETS CHINA BONDS/
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