Hotels Near Marlins Park - China Cash Crunch Eases As Interest Rates Drop Again

Source - http://online.wsj.com/
By - SHEN HONG
Category - Hotels Near Marlins Park
Posted By - Homewood Suites Miami

 

Hotels Near Marlins Park

SHANGHAI--The tight supply of money in China's banking system eased again Monday after short-term interest rates dropped, as the market speculates that state banks are being pressured to lend more.

The rates declined sharply on Friday, after which there was widespread speculation that the People's Bank of China had given major lenders so-called "window guidance," to stop them hoarding cash and to restore stability in the interbank market.

The seven-day repurchase agreement rate--a benchmark of borrowing costs between banks--fell to 6.98% on a weighted-average basis, from 9.25% at Friday's close. It hit a record 28% in an isolated trade Thursday when the money shortage was most acute.

The overnight repo rate fell to 6.11% from 8.70% Friday.

"The major state lenders appeared to have again come out to push funding costs lower with some big orders, and people suspect that it must be due to pressure from the PBOC," said a trader with a local bank in Beijing.

Commercial banks' tax-related deposits at the central bank will mature this week, which will also help ease the crisis, traders said, though the amount isn't publicly known.

Traders are now turning their attention to the Monday announcement of the amount--if any--of central bank bills to be sold in a routine sale Tuesday.

The central bank sold a small amount of the bills last week, draining money from the banking system despite the tight supply. This indicates a determination to encourage discipline among lenders that may have contributed to the cash crunch through risky financing, analysts said.

The central bank's Monetary Policy Committee in a statement Sunday didn't refer to the surge in interbank borrowing costs, but confirmed its commitment to prudent monetary policy. It repeated boilerplate language about improving liquidity management and maintaining "steady and appropriate growth" of credit, indicating little urgency to ease the current financial system stress.