Bloomberg News

China Repo Rate at Six-Week Low as Growth Slows, Cash Returns

October 17, 2012

China’s money-market rate fell to the lowest level in more than six weeks after a report showed economic growth slowed last quarter and as cash returned to the financial system after a weeklong holiday earlier this month.

The world’s second-largest economy grew 7.4 percent in the third quarter from a year earlier, following the second quarter’s 7.6 percent expansion, official data showed today. That matched a median forecast in a Bloomberg survey of 43 analysts. The People’s Bank of China offered 10 billion yuan ($1.6 billion) of 14-day reverse repurchase contracts at a yield of 3.45 percent, according to a trader at a primary dealer required to bid at the auctions. It also sold 20 billion yuan of seven-day agreements at 3.35 percent, the trader said.

“Growth came in line with expectations,” said Kumar Rachapudi, a strategist at Barclays Plc in Singapore. “The declines in money-market rates are partly because of cash returning to the banking system after the Golden Week.”

The seven-day repurchase rate, a gauge of interbank funding availability, decreased 18 basis points to 2.69 percent at 10:25 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.68 percent today, matching the lowest level since Sept. 4.

The government has paused for three months from easing monetary policy even as data showed trade, manufacturing and inflation cooled during the quarter. China’s economic growth has started to stabilize, Premier Wen Jiabao said in remarks published yesterday by the official Xinhua News agency. The government is confident of achieving annual targets and the economy will continue to show “positive changes,” Wen said, according to Xinhua.

The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, fell one basis point to 3.12 percent in Shanghai, according to data compiled by Bloomberg.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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