Bloomberg News

China Money Rate Jumps Most in a Month as PBOC Drains Capital

October 25, 2011

Oct. 25 (Bloomberg) -- China’s money-market rate jumped by the most in a month as the central bank drained capital from the financial system.

The People’s Bank of China issued 55 billion yuan ($8.6 billion) of seven-day repurchase agreements, 45 billion yuan of 28-day contracts and 19 billion yuan of one-year bills, according to a statement on the central bank’s website. With 101 billion yuan of redemptions this week, the monetary authority is set to withdraw capital from the interbank market, according to Liu Junyu, a bond analyst at China Merchants Bank Co.

“The central bank is trying to manage liquidity mainly through open-market operations,” said Shenzhen-based Liu at China Merchants, the nation’s sixth-biggest lender. “Because the withdrawal amount isn’t big, the seven-day repo may remain below 4 percent in the short term.”

The seven-day repurchase rate, which measures interbank funding availability, gained 59 basis points to 4.00 percent as of the 4:30 p.m. close in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. That was the biggest increase since Sept. 27.

The central bank today kept the yield on one-year bills unchanged at 3.5840 percent for an eighth auction, according to the statement.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose eight basis points to 3.64 percent, the most since Sept. 27, according to data compiled by Bloomberg.

The yield on the 3.94 percent government bond due January 2021 climbed four basis points to 3.80 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editors: James Regan, Ven Ram

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

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


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