HKMA sets minimum repo rates under yuan liquidity facility

[HONG KONG] The Hong Kong Monetary Authority (HKMA) has set a minimum interest rate on funds provided under its Renminbi Liquidity Facility, after the overnight offered rate for the offshore yuan fell to negative territory for the first time last week.

The offshore yuan intraday and overnight repo rates under this facility became subject to a minimum of 0 per cent and 0.5 per cent, respectively, from March 31, the city's de facto central bank said in a statement late on Tuesday.

The HKMA rolled out a 10 billion yuan (S$2.09 billion) intra-day repurchase facility to meet increasing demand for the Chinese currency ahead of the Shanghai-Hong Kong stock connect scheme in 2014.

The offshore yuan intraday repo rate is computed as the average of the three most recent Treasury Market Association (TMA) overnight CNH HIBOR fixings, while the overnight repo rate is the average of the three most recent TMA overnight CNH HIBOR fixings plus 50 basis points.

The overnight offered rate for offshore yuan plunged to -3.725 per cent last Thursday as banks tried to evade the implementation of a reserve requirement ratio and, according to traders, investors exiting short yuan positions in a hurry.

REUTERS