China orders all market players to observe bill re-discount rate floor, sources say

Chinese regulators have broadened their directive on bank bill re-discount rates, now requiring all market participants to ensure that both bid and ask prices do not fall below 0.5 percent, sources told Reuters on Wednesday, effectively bringing trading to a standstill.

Bill re-discount rates have plunged in recent months as banks — struggling to find willing borrowers in a sluggish economy — turned to the bill market to meet lending quotas and park excess liquidity.

The move broadens earlier restrictions reported by Reuters that had only applied to some large banks, which sources said had a limited impact as many smaller institutions continued to trade bills at rates below 0.5 percent.

"The latest guidance means selling prices also cannot go below 0.5 percent, so even those looking to buy bills at lower rates have no room to do so," one source said.

"There is basically no tradeable space left. The market has hit an impasse," another source said.

Following Wednesday's broader directive, quotes for bills of all tenors from state-owned and joint-stock banks uniformly snapped back to 0.5 percent.

All sources declined to be named as they were not authorised to speak to the media.

The Shanghai Commercial Paper Exchange did not immediately respond to a request for comment.

Reuters
 

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