Bloomberg News

China Shibor Drops Most in 2 Weeks as Central Bank Injects Cash

May 03, 2012

Chinese banks’ borrowing costs dropped as the central bank added cash to the financial system by offering reverse-repurchase agreements.

The People’s Bank of China sold 65 billion yuan ($10.3 billion) of seven-day reverse-repo contracts today at 3.53 percent, according to a statement on its website. That was 27 basis points lower than the similar-maturity rate in the secondary market yesterday.

“The reverse repo is part of the easing policy,” said Shi Lei, head of fixed-income research in Beijing at Ping An Securities Co., a unit of the nation’s second-biggest insurance company. “The central bank is using the reverse repo to guide market rates lower.”

The Shanghai interbank offered rate that banks charge one another for one-month loans fell 12 basis points, or 0.12 percentage point, to 3.97 percent, according to a daily fixing announced at 11:30 p.m. by the National Interbank Funding Center. That was the biggest decline since April 17.

The six-month swap rate, the fixed cost to receive the seven-day repurchase rate, rose one basis point to 3.40 percent as of 4:30 p.m. in Shanghai, according to data compiled by Bloomberg. It reached 3.33 percent earlier.

The central bank is set to inject a net 117 billion yuan into the market this week, the most in more than three months, said Frances Cheung, a Credit Agricole CIB strategist in Hong Kong.

The seven-day repo rate, a gauge of funding availability in the financial system, increased four basis points to 3.85 percent, according to a weighted average compiled by the National Interbank Funding Center.

“The reverse repo today could be a signal of the uneasiness of the PBOC on the current near 4 percent seven-day repo fixing levels,” Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA, wrote in a report today. “Our view is for seven-day repo fixings to edge lower, closer to 3 percent.”

The yield on the 3.44 percent government bonds due June 2016 was steady at 3.13 percent, according to the Interbank Funding Center.

--Judy Chen, Kyoungwha Kim. Editors: Andrew Janes, Ven Ram

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net; 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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