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China’s benchmark money-market rate rose for the first time in three days after data showing manufacturing expanded at the fastest pace in a year damped speculation the central bank will relax monetary policy.
The Purchasing Managers’ Index rose to 53.3 in April from 53.1 in March, the statistics bureau and logistics federation said in a statement yesterday. That’s the fifth straight reading above the 50 level dividing expansion from contraction. The People’s Bank of China didn’t gauge demand for bill sales tomorrow, suggesting auctions of the securities will remain suspended, according to a trader at a primary dealer required to bid at the auctions.
“Improved manufacturing PMI reduces the risk of a hard landing and the need for monetary stimulus,” said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB. “Also, policy makers have talked about policy fine-tuning but haven’t done this yet. The economy needs support to counter risks from weak exports and the housing market.”
The seven-day repurchase rate, a gauge of funding availability in the financial system, increased three basis points, or 0.03 percentage point, to 3.81 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. Domestic financial markets resumed trading after a two-day public holiday.
The central bank has cut lenders’ reserve requirements twice since November and suspended bill sales this year to make more funds available in the financial system. Banks extended 1.01 trillion yuan ($160 billion) of new loans in March, the most in a year, the People’s Bank of China said on April 12.
The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, rose five basis points to 3.30 percent in Shanghai, according to data compiled by Bloomberg.
The yield on the 3.99 percent government bonds due June 2021 climbed five basis points to 3.53 percent, according to the Interbank Funding Center.
--Judy Chen in Shanghai. Editors: James Regan, Simon Harvey
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