SHANGHAI, Nov 30 (Reuters) - China's short-term money rates spiked on Tuesday amid tight liquidity conditions in money markets, as financial institutions sought cash to meet month-end administrative requirements.
The volume-weighted average of seven-day repo traded in the interbank market rose more than 12 basis points to 2.3732% -- the highest level since Sept. 29.
The volume-weighted overnight repo traded in the interbank market jumped about 32 basis points to 2.1801% --the highest since Oct. 19.
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The rise in money market rates also comes as sentiment in global bond markets turned tepid, while Chinese assets remained largely muted to uncertainty about the new coronavirus variant Omicron.
Some traders said non-bank financial institutions, such as brokerages, had to pay a borrowing cost of about 10% for overnight repos traded in the interbank money market as major state-owned banks, a key source of funds, were unwilling to lend.
The People's Bank of China (PBOC) injected a net 50 billion yuan via reverse repos into the banking system earlier in the session, but the fund injection did little to soothe tensions.
Meanwhile, local governments rushed to sell their so-called special bonds, which mainly fund infrastructure projects, to meet a Tuesday deadline for this year's special bond issuance, the finance ministry said. read more
A total of 204.98 billion yuan ($32.17 billion) worth of local government bonds are due to be sold on Tuesday, according to official data compiled by Reuters, the highest single day issuance of such debt this year.
China has set an annual quota of 3.65 trillion yuan for the issuance of local government special bonds this year.
But Ming Ming, head of fixed income research at CITIC Securities, expected money markets to stabilise in December.
"Structural tools such as re-lending will be the key monetary policy tools, while the central bank would mainly rely on open market operations and medium-term lending facility (MLF) loans to keep liquidity reasonably ample," he said.
A batch of 950 billion yuan worth of MLF is set to expire in mid-December.
($1 = 6.3724 Chinese yuan)
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Reporting by Winni Zhou and Andrew Galbraith; Editing by Kim Coghill and Ana Nicolaci da Costa
Our Standards: The Thomson Reuters Trust Principles.
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November 30, 2021 at 02:18PM
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China's short-term money rates jump on tighter month-end cash conditions - Reuters
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