Bloomberg News

China Money Rate Drops Most in Three Weeks on Policy Easing

November 24, 2011

Nov. 24 (Bloomberg) -- China’s money-market rate dropped the most in three weeks on speculation the central bank will relax lending curbs to support economic growth.

Reserve-requirement ratios for more than 20 rural cooperative banks will fall to 16 percent this month from 16.5 percent, according to an e-mailed statement sent yesterday by the People’s Bank of China’s Hangzhou branch. The monetary authority added a net 22 billion yuan ($3.5 billion) of capital into the financial system this week, after draining 2 billion yuan last week, according to data compiled by Bloomberg.

“As foreign capital inflows decline and redemptions of maturing bills shrink, the central bank will have to lower reserve ratios on a larger scale by the end of this year,” said Shi Lei, head of fixed-income research in Beijing at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “Otherwise, financial institutions would have a very difficult time before the year-end and the Lunar New Year.”

The seven-day repurchase rate, which measures interbank funding availability, declined 22 basis points to 4.13 percent as of 11:05 a.m. in Shanghai, the biggest fall in three weeks, according to a weighted average rate compiled by the National Interbank Funding Center.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped four basis points to 2.96 percent, according to data compiled by Bloomberg.

The central bank kept the yield on three-month bills unchanged at 3.1618 percent for a 13th sale, according to a statement on its website today.

The yield on the 3.99 percent government bond due June 2021 fell two basis points to 3.57 percent, declining for a third day, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editors: James Regan, Simon Harvey

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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