Bloomberg News

China Money Rate Drops a Fifth Day on More Government Spending

November 29, 2011

Nov. 29 (Bloomberg) -- China’s money-market rate declined for a fifth day on speculation the government is spending more as the end of the year approaches.

The People’s Bank of China sold 15 billion yuan ($2.4 billion) of one-year bills today, keeping the yield at 3.4875 percent for a second week, according to a trader at a primary dealer required to bid at the auctions.

“Because of the fiscal spending, which could be as large as 200 billion yuan, there’s room for the PBOC to drain liquidity,” said Ju Wang, a fixed-income strategist at Barclays Capital in Singapore. “That would still point to lower money- market rates.”

The seven-day repurchase rate, a gauge of funding availability in the financial system, declined 32 basis points, or 0.32 percentage point, to 3.67 percent at the close in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The one-year swap rate, the fixed cost to receive the seven-day repo rate, was little changed at 3.03 percent. The yield on the 3.26 percent government bond due June 2014 was steady at 3.07 percent.

Citigroup Inc. cut its estimate for 2012 Chinese economic growth to 8.4 percent from 8.7 percent, according to a research note today. The central bank may cut lenders’ reserve requirements before the Chinese New Year in late January if recent capital outflows continue, the note said. The PBOC may also raise interest rates to stabilize deposits, economists led by Hong Kong-based Minggao Shen and Shuang Ding wrote.

The monetary authority sold 10 billion yuan of 28-day repurchase agreements at 2.8 percent today, according to a statement on its website.

In February, The central bank published a list of 50 primary dealers allowed to participate in open-market operations, including Industrial & Commercial Bank of China Ltd., Agricultural Bank of China Ltd., Bank of China Ltd., China Construction Bank Corp., China Citic Bank Corp., Industrial Bank Co. and Postal Savings Bank of China.

--Editors: Andrew Janes, Sandy Hendry

To contact the reporter on this story: Lilian Karunungan in Singapore at

To contact the editor responsible for this story: Sandy Hendry at

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