China borrowing cost rises to four-year high on cash demand

Chinese yuan/Bloomberg

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The overnight repurchase rate rose as much as 11 basis points to 3.1 per cent, the first time it’s reached that level since April 2015.

Wednesday 17, April 2019

(Bloomberg) --The overnight borrowing cost in China’s money market rose to a four-year high as cash supply tightened just as tax payments increased demand for liquidity.

The People’s Bank of China rolled over about half of the funds coming due through one of longer-term policy tools, while offering CNY 160 billion ($23.9 billion) of seven-day money via open market operations.

According to Hua Tai Securities Company, April and May are a peak time for tax payments, which may total CNY 500 billion.

Ken Cheung, a Senior Asian FX Strategist at Mizuho Bank, said that the rise in the overnight rate shows tighter liquidity conditions amid the bullish China stock market, it may be rising faster than the seven-day rate because of tax payments that might be due in the coming days.

Gross domestic product (GDP) rose 6.4 per cent in the first quarter from a year earlier, surpassing economist estimates and matching the previous three months. In March, factory output jumped 8.5 per cent from a year earlier, much higher than forecast.

Additionally, retail sales expanded 8.7 per cent, while investment was up 6.3 per cent in the year to date.

"Looking from a broad perspective, the central bank intends to tighten marginally and the probability of a reserve-requirement ratio cut is now lower,” said Qi Sheng, Chief fixed-income Analyst at Zhongtai Securities Company.


TAGS : Chinese Yuan, overnight borrowing cost

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