Bloomberg News

China Money Rate Climbs Most in 2 Weeks as PBOC Drains Capital

December 15, 2011

Dec. 15 (Bloomberg) -- China’s money-market rate rose the most in two weeks on speculation cash supply will wane as the central bank drains funds from the financial system.

The People’s Bank of China will withdraw a net 73 billion yuan ($11.5 billion) of capital this week as bill sales exceed redemptions, according to data compiled by Bloomberg. The central bank reiterated its stance yesterday for a prudent monetary policy, according to a statement on its website summarizing the results of an annual economic planning meeting of Communist Party leaders in Beijing.

“The market doesn’t understand why the central bank is selling so many bills to drain capital,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The government’s statements coming after the work conference haven’t shown any sign of a policy change.”

The seven-day repurchase rate, which measures interbank funding availability, rose 23 basis points to 3.46 percent as of 10:36 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest increase since Nov. 30.

China’s manufacturing may contract for a second month in December as Europe’s debt crisis weighs on exports and home sales slide, a preliminary reading from a purchasing managers’ index reported by HSBC Holdings Plc and Markit Economics indicated today. The gauge was at 49 compared with a final number of 47.7 for November.

The central bank kept the yield on three-month bills unchanged at 3.1618 percent for a 16th sale, according to a statement on its website. It issued 3 billion yuan of the bills and 10 billion yuan of 91-day repurchase contracts.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined six basis points to 2.84 percent, according to data compiled by Bloomberg.

The yield on the 3.44 percent government bonds due June 2016 was unchanged at 3.05 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editors: Simon Harvey, Anil Varma

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

%CNY

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.


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