China money markets see signs of stress as cash demand rises

SHANGHAI Liquidity conditions in China's interbank money markets showed signs of stress on Tuesday as seasonal cash demand kicked in, while the central bank's move to lower the amount of cash banks must set aside as reserves has yet to come into effect.

The volume-weighted average overnight repo traded in the interbank market was 2.4505 per cent, the highest since February 2021, with short-term primary money rates rising across the board in morning deals.

The volume-weighted average price of seven-day repo went up by 2 basis points to 2.2056 per cent.

The quarter-end demand for funds drove higher short-term money rates up, according to traders.

Companies and financial institutions usually have to shore up their cash positions towards the month end and quarter-end for various needs and administrative requirements.

Market watchers said that the tightness was unlikely to last as official liquidity support would take effect soon.

Ming Ming, chief economist at Citic Securities, said that easing measures will come into effect and may help alleviate tight funding conditions.

The People's Bank of China PBOC said it would reduce the reserve requirement ratio RRR for all banks by 25 basis points from March 27.