SHANGHAI - China's money rates fell slightly on Wednesday, as ample liquidity offset the impact of required reserve ratio (RRR) payments, dealers said.
Banks must adjust their reserve balances at the central bank on the 5th, 15th and 25th in order to meet the RRR, with the amount of the payment or refund dependent on changes in their customer deposit balances.
An increase in deposits requires banks to add to their reserves.
The benchmark weighted-average seven-day bond repurchase rate fell 7.69 basis points to 2.8012 per cent from 2.8781 per cent at the close on Tuesday.
The 14-day repo rate fell to 3.2086 per cent from 3.3270 per cent, and the one-day repo rate was little changed at 2.2564 per cent from 2.2563 per cent.
Dealers said the ample liquidity was due to the injection from fiscal deposits and central bank purchase of foreign exchange inflows.
A Reuters analysis shows that the Ministry of Finance is likely to pump a record-high 1.6 trillion yuan (S$312.90billion) into the system in the last two months of this year through the transfer of tax revenues out of the central bank and into commercial banks.
Meanwhile, the recent rally in the yuan has prompted corporates to increase their sales of dollars to the commercial banks, which typically pass them on to the central bank.
Central bank purchases of forex increase expand the base money supply, increasing liquidity.
Market players expect the People's Bank of China (PBOC) could conduct a small net drain of funds through open market operations this week, but the impact on interbank rates will likely be minimal.