Bloomberg News

China Money Rate Drops From 4-Month High as Cash Shortage Eases

June 24, 2012

China’s money-market rate dropped from a four-month high on speculation cash supply will rise once banks complete month-end reserve requirements.

Lenders have to park funds with the central bank on the fifth, 15th and 25th of each month. Policy makers may cut the reserve ratio for banks “soon” and use reverse repurchase agreements to improve money supply and boost loans, China Securities Journal reported on its front page, citing unidentified people in the market.

“The cash shortage is temporarily easing,” said Liu Junyu, a bond analyst at China Merchants Bank Co., the nation’s sixth- biggest lender. “The central bank may also inject money to the financial system by issuing reverse repos this week.”

The seven-day repurchase rate, which measures interbank funding availability, dropped 21 basis points to 4.13 percent as of 10:58 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 4.39 percent on June 21, the highest level since Feb. 27. Local financial markets were shut on June 22 for a holiday.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed four basis points to 2.72 percent, according to data compiled by Bloomberg.

The yield on the 3.14 percent government bonds due February 2017 was unchanged at 2.93 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editors: Simon Harvey, Sandy Hendry

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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