China's money market rates jumped across the curve on Friday, buoyed by cash calls from corporate tax payments and end of the month demand from banks, but the liquidity crunch may ease late next week, traders said. October is a month when many companies pay their quarterly income tax for the third quarter. Some banks are also preparing cash to meet month-end regulatory requirements for the loan-to-deposit ratio, traders said.
"Few institutions were actively offering money this morning, while demand pushed rates up sharply," said a trader at a major Chinese commercial bank in Shanghai. "Temporary cash calls will ease next week, while supply will be nice, so we expect the squeeze may be over late next week."
The benchmark seven-day government bond repurchase rate jumped 46 basis points to 5.0177 percent from 4.5618 percent at Thursday's close. The shortest overnight repo rate rose to 4.9491 percent from 4.2235 percent while the 14-day rate was up at 5.2986 percent from 4.6594 percent. China's interest rate swaps curve returned to normal on Friday after two days of inversion as a technical rebound boosted the long end of the curve, traders said.
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