SHANGHAI, April 25 (Reuters): China’s key seven-day money rates rose sharply on Wednesday as banks conserved funds to meet demand from retail customers withdrawing cash ahead of a public holiday next week, dealers said.
Banks still need money to demonstrate compliance with mandated loan-to-deposit ratios assessed at the end of each month, traders said.
“Money demand is strong around month-end and prior to holidays, so shorter-term money rates face pressure,” said a dealer at a Chinese bank in Shanghai.
“But longer-term, such as 14-day, rates have been steady, indicating money conditions will improve after the holiday.”
China’s markets will be closed April 30 and May 1 for the Labor Day Holiday.
The benchmark seven-day repo rate rose to 3.9258 per cent from 3.7356 per cent on Tuesday, while the overnight repo rate, the shortest tenor repo, was up to 3.4754 per cent at midday from 3.2245 per cent at Tuesday’s close.
But the 14-day money rate only inched up 3.28 basis points to 3.9863 per cent from 3.9535 per cent.
Dealers said they expected money rates would continue to hover around current levels next week due the month-end and holiday factors.
Most interest rate swaps fell slightly. The benchmark 10-year IRS dropped 10 basis points to 3.35 per cent at midday and the one-year IRS edged 3 bps lower to 3.21 per cent.
