Bloomberg News

China Repo Rate Falls as PBOC Skips Bill Sales; Swap Rate Rises

February 09, 2012

Feb. 9 (Bloomberg) -- China’s benchmark money-market rate fell, snapping a three-day advance, as a trader said the central bank will skip bill sales today. The one-year swap rate rose for a fourth day after inflation unexpectedly accelerated.

The monetary authority will only sell 20 billion yuan ($3.2 billion) of 91-day repurchase agreements, according to a trader at a primary dealer required to bid at the auctions. Consumer prices rose 4.5 percent in January from a year earlier, official data showed today. That compares with the median 4 percent estimate in a Bloomberg News survey and a 4.1 percent gain in December. The data is distorted by increased spending over the Chinese New Year holiday in January.

The inflation data “isn’t necessarily pointing to a new trend,” said Matt Huang, a rates strategist at Macquarie Bank Ltd. in Singapore. “You’re going to see a better reading next month and we better wait to see whether the trend is increasing or not.”

The seven-day repurchase rate, a gauge of funding availability in the financial system, fell four basis points to 3.68 percent at 10:34 a.m. 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, rose eight basis points to 3.33 percent.

Today’s inflation data may reinforce Premier Wen Jiabao’s cautious approach to adding stimulus to support growth. The government raised retail fuel charges yesterday and companies including Starbucks Inc. and McDonald’s Corp. said last month they lifted prices to counter higher wages and commodity costs.

Gross domestic product may increase 8.5 percent in the first quarter from a year earlier and consumer prices may rise about 3.5 percent, the China Securities Journal reported today, citing the State Information Center.

Government bonds fell. The yield on 3.93 percent government securities due August, 2021 gained five basis points, or 0.05 percentage point, to 3.55 percent.

--Editors: Andrew Janes, Ven Ram

To contact the reporter on this story: Kyoungwha Kim in Beijing at kkim19@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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