Bloomberg News

China 7-Day Money Rate Rises as Banks Hoard Cash Before Holiday

January 12, 2012

Jan. 12 (Bloomberg) -- China’s money-market rate climbed for the first time in three days as banks hoarded cash to meet increased customer withdrawals before the weeklong Chinese New Year holiday, which starts Jan. 23.

The seven-day repurchase rate rose even after the central bank refrained from offering repurchase contracts for a fourth week, according to traders who are required to participate in the auctions. Consumer prices increased 4.1 percent from a year earlier in December, the smallest gain since September 2010, the statistics bureau said today.

“Liquidity is tight and will get tighter before the holiday,” said Liu Junyu, a bond analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. “The central bank will have to either cut reserve-requirement ratios or offer reverse-repurchase contracts next week.”

The seven-day repurchase rate, which measures interbank funding availability, climbed 19 basis points to 4.18 percent as of 4:30 p.m. in Shanghai, 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 repo rate, rose three basis points to 3.08 percent, according to data compiled by Bloomberg.

The yield on the 3.99 percent government bond due June 2021 declined two basis points to 3.40 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editors: James Regan, Anil Varma

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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