(Yicai Global) July 18 -- China's treasury deposit interest rates have tumbled by more than a quarter after the central bank boosted interbank liquidity in the second half.
The Ministry of Finance and the People's Bank of China yesterday sought bidders to hold a CNY150 billion (USD22 billion) time deposit, with the winning bank offering a 3.7 percent interest rate, down more than a percentage point from the last bid on June 15.
The central bank lowered the required deposit reserve ratio on July 5, meaning banks do not need to hold as much money in cash form. This led to an abundance of liquidity, which is likely the cause behind the declining interest rate, two sources from separate banks told Yicai Global.
"In the second half of the year, the central bank will continue to inject liquidity through the required reserve ratio and medium-term lending facilities, and this increased liquidity will become a general trend," added Ming Ming, chief fixed-income analyst at CITIC Securities, one of China's biggest investment banks.
The three-month Shanghai Interbank Offered Rate, known as SHIBOR, hit an 18 month low of just over 3.6 percent yesterday.
Editor: James Boynton