By Chen Yixin and Pete Sweeney
SHANGHAI (Reuters) – China’s money rate was little changed on Monday, with dealers crediting ample liquidity in the market for the relative stability.
China’s banks need to make scheduled payments to meet their reserve requirement ratio (RRR) on Monday, but the move did not have a discernable impact on rates.
“The payment has had little impact on our money condition,” said a dealer at a brokerage in Shanghai. “Now the money is at a balanced level, not too tight or not too loose.”
Banks make regular payments every 5th, 15th and 25th of each month in order to fulfill their RRRs, with the amount of the payment adjusted in line with the current balance of deposits.
Market players also expect the central bank will continue to inject money via seven-day reverse repurchase agreements.
The People’s Bank of China (PBOC) asked commercial banks about their demand for 28- and 91-day bond repurchase agreements and seven-day reverse repurchase agreements on Monday, which traders took to mean the central bank may auction reverse repos again this week as it did last week.
Reverse repos in China inject money on issuance and drain it on maturity.
Dealers and sources at Chinese financial institutions believe the central bank will cut banks’ RRRs in August to further support the economy.
The benchmark seven-day weighted-average bond repurchase rate inched up 2.25 basis points to 3.4154 percent from 3.3929 percent. The shortest overnight repo rate fell to 2.4918 percent by midday from 2.5137 percent at Friday’s close.
The 14-day repo rate edged up to 3.4107 percent from Friday’s 3.3777 percent.
($1 = 6.38 Chinese yuan)
(Editing by Kim Coghill)