Bloomberg News

China Money Rate Gains a Third Day as Reserve Ratios Maintained

February 15, 2012

Feb. 15 (Bloomberg) -- China’s benchmark money-market rate rose for a third day as policy makers refrained from cutting banks’ reserve-requirement ratios and as upcoming company share sales tied up cash.

The People’s Bank of China has avoided lowering the amount lenders must set aside as reserves since it cut the rate by 50 basis points to 21 percent in December. Data this month showed faster manufacturing activity, higher-than-forecast inflation and a rising trade surplus. Shantou Dongfeng Printing Co. may raise up to 739 million yuan ($117 million) in an initial public offering on the Shanghai Stock Exchange, according to a Feb. 5 filing to the bourse.

“Obviously the PBOC doesn’t want to ease further,” said Chen Qi, a Shanghai-based emerging-market rates strategist at UBS Securities Ltd. “They have been cautious this time because there were some side effects from the 2008 stimulus and given the stronger economic data. Also, there are mid-sized stock IPOs coming” driving money-market rates higher, she said.

The seven-day repurchase rate, a gauge of funding availability in the financial system, increased 12 basis points, or 0.12 percentage point, to 3.91 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

China’s economy will maintain stable, fast development this year even as the international situation remains “grim” and “complicated,” the People’s Daily reported today, citing Li Pumin, the Beijing-based spokesman for the National Development and Reform Commission, China’s top economic planner.

Prudent Policy

The People’s Bank of China will adopt “prudent” monetary policy as prices in China still face upward pressure, while the economy is moderating, the central bank said in a statement posted on its website today. Consumer prices rose 4.5 percent in January from a year earlier after increasing 4.1 percent in December, the National Bureau of Statistics said on Feb. 9.

The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, rose seven basis points to 3.34 percent, according to data compiled by Bloomberg.

The monetary authority didn’t gauge demand for bill sales today, according to a trader at a primary dealer required to bid at the auctions. The central bank asked banks to submit orders for 91-day repurchase contracts this morning, according to the trader who declined to be identified because the information isn’t public.

Government bonds fell, with the yield on the 3.93 percent securities due August 2021 rising two basis points to 3.53 percent.

--Editors: Andrew Janes, Ven Ram

To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net;

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


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