Chinese money rates climb to its three-month high

Published By : 01 Jul 2014 | Published By : QYRESEARCH

The central bank of China has restarted selling repurchase agreement in order to flow the funds from the financial system. This has led to setting a benchmark money-market rate to reach its highest level in the span of more than three months.

The People’s Bank of China has sold USD 3.2 billion in a 28 day repos for a 4 percent, according to a statement released by their site. The PBOC has constrained from absorbing funds in its weekly open-market operations which were held on June 26th, for the first time in four months. Many regulators have revised the way the loan-to-deposit ratios, which has led to the increase in capacity of the bank to lend money.

According to a Shanghai-based analyst the collaboration of restarting repo sales and revision of the loan-to-deposit ratio displays the central bank can be shifting its focus from the loosening finance policy to loosening the credit. This seven-day repo rate is a gauge for interbank funding availability. It jumped 45 basis point or to 0.45 percent point to 4.45 percent. This rate has touched a three-month high, and the previous percent earlier was 4.47.

The revised credit rules are still limiting the total lending from a bank to 75 percent of its deposits. According to a Beijing-based economist the effect of revision should not be overestimated. Also, with the overall level of bank’s lending falling below 75 percent currently, it may not lead to a crucial increase during the short run.

According to the data provided by National Bureau of Statistics, the official Purchasing Manager’s Index in China has surged to 51.0 last month, which is the highest level data recorded this year.
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