China’s money rates eased on Thursday after a three-day holiday as cash flowed back into the market after banks and their corporate clients wound down a scramble to make tax and reserve escrow payments, traders said.
Reuters reported on Thursday that the volume-weighted average for the unofficial benchmark seven-day repo rate was at 2.9421 at Thursday midday, down from 2.9850 at last close. The overnight rate and the 14-day rate posted similar mild declines.
Rates had already begun to relax on Friday after the central bank allowed 124 billion yuan to flow back into the money market through open market operations, the first time it has injected funds on a net basis since mid-February when markets reopened after the lunar new year holiday.
Prior to that day, rates for the most commonly traded bond repurchase contracts had been steadily rising, with the volume-weighted average rate for the seven-day repo closing at almost 5 per cent on April 25, its highest since Feb. 2012.
The end of the month usually sees rates come under upward pressure as banks adjust their accounts to meet regulatory ratio requirements. The end of April was aggravated by corporates stocking up on cash to make tax payments and by a holiday that saw markets close for the first three days of the week, denying banks access to fresh funds from the interbank market.