Bloomberg News

China Money Rate at 2-Month Low on Ample Funds, Slowing Exports

October 13, 2011

Oct. 13 (Bloomberg) -- China’s benchmark money-market rate dropped to a two-month low as demand for cash eased after last week’s public holiday amid signs the world’s second-largest economy is slowing.

Customs bureau data showed today the weakest export growth since February. The State Council unveiled measures including tax breaks and easier access to bank loans to help small firms, after the collapse of manufacturers in Wenzhou city. The seven- day repurchase rate has fallen every day since the end of last week’s National Day holiday.

“The money market is flush with funds after the Golden holiday week,” said Pieter Van Der Schaft, the Hong Kong-based head of Asian interest-rate strategy at Morgan Stanley. “Although new measures were announced to promote more loans to small and medium enterprises, the policy bias is still hawkish until inflation is firmly brought under control.”

The seven-day repurchase rate, a gauge of funding availability in the financial system, fell 21 basis points, or 0.21 percentage point, to 3.14 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate was at the lowest level since Aug. 15.

Overseas sales rose 17.1 percent in September from a year earlier, compared with 24.5 percent growth in August and the 20.5 percent median estimate in a Bloomberg News survey of economists.

Consumer prices rose 6.1 percent in September from a year earlier, according to the median estimate of 22 economists surveyed by Bloomberg News before data due tomorrow. Inflation in August was 6.2 percent, compared with a three-year high of 6.5 percent in July, and the government’s full-year target of 4 percent.

Bill Sales

The People’s Bank of China kept the yields on three-month and three-year bills unchanged at auctions today. The bank issued 7 billion yuan ($1.1 billion) of three month bills at 3.1618 percent for a seventh sale, while offering 20 billion yuan of three-year bills at 3.97 percent, according to traders at primary dealers required to bid at the auctions.

The three-year bills were last sold on Aug. 18 which is a key sign the central bank still favors keeping monetary policy tight, Van Der Schaft said.

The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, decreased seven basis points, or 0.07 percentage point, to 3.53 percent.

--Editor: Sandy Hendry

To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net;

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


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