Bloomberg News

China Money-Market Rate Falls to Three-Week Low After Reserve-Ratio Cut

February 28, 2012

China’s money-market rate touched a three-week low on speculation the supply of cash is increasing since the reduction in banks’ reserve ratios took effect.

The seven-day repurchase rate, which measures interbank funding availability, dropped for a third day after the People’s Bank of China suspended one-year bill sales for a ninth week. The central bank issued 10 billion yuan ($1.6 billion) of 28-day repurchase contracts, according to a trader required to bid at the auctions.

“Liquidity has improved a lot after the reserve-ratio cut became effective on Feb. 24,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The central bank probably won’t resume bill sales this week because bill redemptions are too low.”

The seven-day repurchase rate was steady at 3.66 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It touched 3.45 percent, the lowest level since Feb. 6.

A total of 2 billion yuan of central bank bills and repurchase contracts will mature this week, Liu said.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, was unchanged at 3.35 percent, according to data compiled by Bloomberg. The yield on the 3.44 percent government bond due June 2016 was unchanged at 3.16 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Andrew Janes, Simon Harvey

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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