China Repo Rate Gains for Third Day as PBOC Sales to Drain Cash
February 08, 2012, 4:28 AM ESTBy Bloomberg News
Feb. 8 (Bloomberg) -- China’s benchmark money-market rate rose for a third day after the central bank gauged demand for bill sales tomorrow, bolstering speculation policy makers are reluctant to ease monetary policy.
The People’s Bank of China asked lenders to submit orders for three-month bills and 91-day repurchase contracts this morning, according to a trader at primary dealers required to bid at the auctions. The monetary authority sold 26 billion yuan ($4.1 billion) of 28-day repurchase contracts at 2.8 percent yesterday, resuming sales for the first time in eight weeks.
“It again shows the PBOC is reluctant to ease aggressively,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “Whether or not it will issue bills tomorrow depends on demand, but the act of gauging demand itself reflects a hawkish, or a less dovish, stance. Possibly policy makers are still mindful of inflationary pressure.”
The seven-day repurchase rate, which measures interbank funding availability, rose 22 basis points, or 0.22 percentage point, to 3.72 percent as of 5 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center.
A report tomorrow may show the rise in consumer prices cooled to a 16-month low of 4 percent in January from a year earlier, compared with 4.1 percent in December, according to a Bloomberg News survey of 33 economists.
“Most players agree that monetary policy will be easier when compared with 2011,” said Ju Wang, a Barclays Capital strategist in Singapore. “A reserve-requirement ratio cut will come. But more significantly, the higher rates also reflect improving confidence in the growth outlook.”
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, increased one basis point to 3.25 percent, according to data compiled by Bloomberg. The yield on the 3.93 percent government bond due August 2021 rose four basis points, or 0.04 percentage point, to 3.50 percent, according to the Interbank Funding Center.
--Kyoungwha Kim, Judy Chen. Editors: Andrew Janes, Sandy Hendry
To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net 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.
