MONEY MARKETS-China repos up on bank reserves, US yields down

SINGAPORE, Jan 26 (BestGrowthStock) – Chinese repo rates jumped on
Tuesday after a hike in bank reserve requirements came into
effect while U.S. long-term yields fell as President Barack
Obama proposed a three-year freeze on domestic spending.

* China’s weighted average 7-day repo rate (CN7DRP=CFXS: )
jumped as high as 1.5352 percent, its highest since December,
before easing to 1.5338 percent. China’s central bank told
selected banks that a 0.5 percentage point increase in reserve
requirements came into effect on Tuesday.

The increase had been announced earlier this month as China
moves to tighten liquidity and curb lending growth to prevent
the fast growing economy from overheating. [ID:nSGE60P039]

* One-year interbank rates in Shanghai (SHIBOR=: ) ticked up
to 2.3261 percent although China’s central bank surprisingly
left the one-year bill rate unchanged from last week at 1.9264
percent at an auction on Tuesday.

The central bank also decided not to drain funds from the
money market on Tuesday through short-term bond repurchase
agreements, traders said.

However, they said these moves could be due to
unwillingness to drain more money from the system ahead of the
Lunar New Year holidays next month and did not imply any change
in policy.

* In the United States, longer-term yields (USDIRS: )
(US10YT=RR: ) fell after Obama proposed holding government
spending at current levels for three years, although traders
said short-term rates would continue to be volatile, tracking
the stock market.

“Markets are very skittish, not sure if it is the Obama
news or the China tightening,” said one trader in Singapore.

“You could make an argument that it may be good for the
longer end, (since) they are showing some fiscal restraint.”

* In New Zealand, swap rates were steady (NZDIRS: ) as a
Reuters poll indicated the Reserve Bank of NZ was likely to
hold rates steady at a policy meeting on Wednesday.

* Financial markets in India were closed for a national
holiday. The Reserve Bank of India reviews policy on Jan. 29
and is expected to raise the cash reserve ratio for banks, but
China’s tightening and the strength of economic data are slowly
raising the odds that there might even be a rise in benchmark
policy rates.

* In Singapore, 3-month U.S. dollars (SIUSDD=ABSG: ) are
quoted at an average 0.25286 percent, unchanged for the past
week.

* Singapore interbank 3-month rates (SGDDFIX=ABSG: ) are
softer on average at 0.57552 percent, a gradual drop from
0.57787 on Monday.

Stock Investing

(Reporting by Raju Gopalakrishnan; Editing by Kim COghill)

MONEY MARKETS-China repos up on bank reserves, US yields down