Interbank lending rates hit new high

銀行間市場利率創2月以來新高

China's 7-day repurchase rate, a gauge of interbank lending conditions, jumped over 7 percent Monday. The rise pointed to a worsening cash squeeze facing commercial banks as a hike in bank reserve ratios announced last week took effect.

To avoid a disruption to the money supply for commercial banks, the central bank injected around 50 billion yuan in liquidity into two major commercial banks through reverse repo on Monday, said an unconfirmed report by China Securities Journal.

According to the arrangements of the central bank, there is limited room for the lending rates to rise in the future, but tight market liquidity won't ease very soon due to the reserve ratio requirement and seasonal factors, analysts said.

Given the banks' deposit balance at the end of May, analysts calculated that the Monday reserve ratio payment required by the central bank could mop up 380 billion yuan (US$58.4 billion).

The monthly reserve ratio payment has exerted great pressure on the banks, which have been already facing a cash squeeze.