China key money rate inches up; c.bank drains funds - Reuters

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Tue May 22, 2012 1:25am EDT

  * C.bank has already drained 48 bln yuan via open market      * Month-end factors could push rates higher late this week        By Chen Yixin and Gabriel Wildau          SHANGHAI, May 22 (Reuters) - China's money rates inched up  on Tuesday after the central bank drained funds through an open  market operation, but the rise was limited because there was  still enough liquidity in the banking system, traders said.           China's central bank pulled 60 billion yuan ($9.48 billion)  from the money markets through 28-day bond repurchase agreements  on Tuesday. With only 12 billion yuan in central bank bills and  repos maturing this week, Tuesday's action guarantees a net  drain for the week of at least 48 billion yuan.               "When money is ample, the drain in open market does not have  a large impact on money conditions, so money rates are almost  unchanged," said a dealer at a Chinese bank in Shanghai.              But he and other dealers said money rates could rebound  slightly as the impact of a cut in banks' required reserve ratio  (RRR) fades and banks begin to put aside funds to meet  heightened month-end fund demand.             "Month-end factors could limit banks' willingness to lend  money, so rates could rise slightly late this week or next," a  Chinese bank dealer said.             The benchmark weighted-average seven-day bond repurchase  rate inched up 2 basis points to 2.6933 percent by  midday, but still hovered near a 13-month low.        The 14-day money rate gained 0.42 bps to  2.8038 percent at midday, while the overnight rate inched up  1.06 bps to 1.8309 percent.           Liquidity remained ample following China's 50 bps cut in  required reserve ratios (RRR), which took effect on May 18 and  injected around 420 billion yuan into the banking system.                Interest rates swaps (IRS) were little changed, amid  expectations of further monetary easing after comments by  Chinese Premier Wen Jiabao that the government will focus more  on bolstering growth.         Benchmark five-year IRS rose by around 4 bps to  around 3.0 percent, while one-year IRS rose to 2.78 percent from  Monday's 2.69 percent.                                                        Current  Prev close  Change                                         (pct)           (bps)     7-day repo                       2.6933   2.6733     +2.00   7-day SHIBOR                     2.7000   2.6828     +1.83    Note: Repo rate is weighted average.                       (Editing by Sanjeev Miglani)  

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