China key money rate falls to 13-month low on ample liquidity - Reuters

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Thu May 24, 2012 1:39am EDT

  * Key 7-day repo rate at 2.2308 pct, lowest since April 2011      * Ample liquidity offsets impact of net drain in open market      * HSBC PMI falls to 48.7 in May from 49.3 in April        By Chen Yixin and Kazunori Takada         SHANGHAI, May 24 (Reuters) - China's key money rate fell 20  basis points to a 13-month low on Thursday as liquidity  conditions remained ample and offset a net drain of funds via  open market operations this week.             The People's Bank of China (PBOC) drained 30 billion yuan  ($4.74 billion) via 91-day repurchase agreements on Thursday,  taking the total net drain of funds this week to 78 billion  yuan.         A dealer at a Chinese commercial bank in Shanghai said big  banks had plenty of cash on hand and were lending to smaller  institutions.         "Overall, we are not lacking money," he said.             Signs of further slowdown in the Chinese economy have led to  expectations that the authorities will maintain easy money  conditions to encourage lending and support growth.           Data released on Thursday show that the HSBC Flash  Purchasing Managers Index, the earliest indicator of China's  industrial activity, shrank further in May, underscoring worries  of a sharper slowdown than first thought.             The benchmark weighted-average seven-day bond repurchase  rate slumped 20.71 basis points to 2.2308 percent,  its lowest point since April 2011.            The 14-day money rate rose slightly to 2.7823  percent at midday, while the overnight rate inched  up 4.32 bps to 1.8944 percent.        Interest rates swaps (IRS) fell, with benchmark five-year  IRS falling by around 13 bps to 2.84 percent and  one-year IRS dipping to 2.54 percent from Wednesday's 2.67  percent on a slump in the seven-day repo rate.                                              Current  Prev close  Change                                         (pct)           (bps)     7-day repo                       2.2308   2.4379     -20.71   7-day SHIBOR                     2.2277   2.4196     -19.19    Note: Repo rate is weighted average.            ($1 = 6.3345 Chinese yuan)                   (Editing by Ramya Venugopal)  

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