Bloomberg News

China’s Money-Market Rate Jumps for Fourth Day on Cash Shortage

October 28, 2011

Oct. 28 (Bloomberg) -- China’s benchmark money-market rate advanced this week by the most in four months on speculation banks are storing funds to meet month-end capital requirements.

The seven-day repurchase rate jumped for a fourth day after the People’s Bank of China withdrew a net 19 billion yuan ($3 billion) from the banking system this week, compared with 22 billion yuan of withdrawals in the five days through Oct. 21, according to Bloomberg data. The Ministry of Railways sold 20 billion yuan of seven- and 20-year bonds this week, which were 17 times oversubscribed, according to Wee-Khoon Chong at Societe Generale SA.

“Banks are hoarding cash to boost capital at month-end,” said Chong, a fixed-income strategist at Societe Generale in Hong Kong. “Active bond issuance also led to a jump in rates.”

The repo rate, which measures interbank funding availability, gained 160 basis points in the five days to 5.04 percent as of 4:43 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the biggest weekly rise since June 25.

The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose 10 basis points, or 0.1 percentage point, to 3.61 percent this week, according to data compiled by Bloomberg.

The yield on the 3.9 percent government bonds due September 2012 climbed one basis point to 3.15 percent during the five-day period, according to the Interbank Funding Center.

--Editors: Simon Harvey, Ven Ram

To contact Bloomberg News staff for this story: Andrea Wong in Taipei at awong268@bloomberg.net

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


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