China's Interbank Liquidity Conditions Likely to Tighten Again

Quotes from Standard Chartered:

-China’s interbank liquidity conditions are likely to tighten again ahead of the Lunar New Year holidays (31 January to 6 February), on the back of both seasonal factors and recent IPO resumption.

-The cost of funding – especially longer-term funding covering the full Lunar New Year holiday period – has risen materially. 1M and 3M repo rates have been on a one-way uptrend since the second week of January.

-The 1M rate has risen by 200bps since 8 January to 7.7%, and the 3M repo has risen by 70bps to 7.2%. The 2Y SHIBOR NDIRS climbed slightly last week but remains c.15bps lower than its recent high in December 2013.

-Although we expect this bout of liquidity tightening to be brief and milder than those in June and December 2013, it is likely to prompt banks to raise their 3M SHIBOR fixing quotations further on the back of expanded issuance of negotiable certificates of deposit (NCDs) this year.The material has been provided by InstaForex Company – www.instaforex.com

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