Bloomberg News

China Money Rate Slumps Most in a Month After PBOC Adds Funds

June 27, 2011

June 27 (Bloomberg) -- China’s money-market rate fell the most in more than a month on speculation central bank injections of capital will help ease a cash shortage.

The People’s Bank of China added a net 87 billion yuan ($13.4 billion) of funds last week and has pumped in 467 billion yuan in the past six weeks. A total of 142 billion yuan of central bank bills and repurchase agreements will mature this week, compared with 88 billion yuan last week, according to Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai.

“There will be an easing of the cash shortage this week, especially in the latter part of the week, as the central bank injects such a big amount of capital,” said Shi Lei, head of fixed-income research in Beijing at Ping An Securities Co., a unit of the nation’s second-largest insurance company.

The seven-day repurchase rate, which measures interbank funding availability, dropped 117 basis points to 7.25 percent as of the 4:30 p.m. close in Shanghai, the biggest decline since May 18, according to a weighted average rate compiled by the National Interbank Funding Center.

China’s inflation won’t exceed 6 percent in any single month as the pace of price increases stabilizes and slows in the second half of the year, Fan Gang, a former academic adviser to the People’s Bank of China, said yesterday.

Consumer prices climbed 5.5 percent in May from a year earlier, the most since July 2008, the statistics bureau said on June 14. China will find it difficult to meet its official inflation target of 4 percent this year, Premier Wen Jiabao said, according to a Radio Television Hong Kong report today.

One-year interest-rate swaps, the fixed cost needed to receive the floating seven-day repo rate, slid eight basis points to 3.77 percent, according to data compiled by Bloomberg. It touched 3.74 percent, the lowest level since June 15.

The yield on the 3.83 percent government bond due January 2021 dropped four basis points to 3.83 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editor: Sandy Hendry

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

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To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.


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