Jul 11, 2019 (China Knowledge) - China’s has introduced trading alerts on its interbank trading platform after the recent plunge in some short-term rates. These alerts aim to prevent money market rates from falling below the rate that the People’s Bank of China offers on excess cash that banks park with the central bank, which is currently 0.72%.
The National Interbank Funding Center (NIFC) and The China Foreign Exchange Trade System (CFETC) will alert traders if they place orders outside a daily trading band of 70 basis points around the weighted average repo rate.
The PBOC has suspended the traders at Ping An Bank and China Merchants Bank for one year who involved in some “abnormal” trades in the interbank market which put the overnight repo rate at 0.09% on 2 July, far below normal market rates.
The overnight repo rate fell below 1% between June 24 and July 5 according to the PBOC, hitting a low of 0.84% on July 4. After the move, the rate is now trading at around 1.82% by early Wednesday afternoon, which is substantially higher than before.
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