Bloomberg News

China Money Rate Poised for Biggest Weekly Gain in Two Months

June 14, 2012

China’s money-market rate was set for its biggest weekly gain in two months on speculation demand for cash will increase as the end of the quarter approaches.

The seven-day repurchase rate, a gauge of interbank funding availability, rose for a fourth day even after the central bank lowered the yields on 28- and 91-day repurchase contracts this week. The finance ministry sold 15 billion yuan ($2.4 billion) of 273-day bills at an average yield of 2.27 percent, according to a trader at a finance company that participates in government debt auctions. That compared with the 2.20 percent rate on similar-maturity debt in the secondary market.

“Banks may need more money to boost their loan-to-deposit ratios to meet quarter-end requirements,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. “The high auction yield on short-term debt shows cash supply is getting tight.”

The seven-day repurchase rate increased 27 basis points this week to 2.73 percent as of 11:25 a.m. in Shanghai, the biggest increase since the five days through April 6, according to a weighted average rate compiled by the National Interbank Funding Center. The rate rose three basis points, or 0.03 percentage point, today.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed 17 basis points in the week to 2.56 percent, according to data compiled by Bloomberg. The rate dropped one basis point today.

The central bank sold 91-day repurchase agreements yesterday at 3.05 percent, from 3.14 percent a week ago, according to a statement on its website. It cut the rate on 28- day repos by five basis points to 2.75 percent on June 12.

The yield on the 3.14 percent government bond due February 2017 rose 13 basis points this week to 2.90 percent, according to the Interbank Funding Center. The rate dropped one basis point today.

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

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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