Bloomberg News

China Money Rate Drops a Second Day on Bets PBOC Will Add Cash

November 05, 2012

China’s benchmark money-market rate declined for a second day on speculation the central bank will add more funds to the financial system using reverse-repurchase contracts to support the economy.

The People’s Bank of China gauged demand for seven-, 14-and 28-day reverse-repo contracts this week, according to a trader required to bid at the auctions. The PBOC injected a net 379 billion yuan ($61 billion) last week, the most in data compiled by Bloomberg that goes back to 2008. China’s economy is likely to maintain stable, relatively fast growth, the monetary authority said in a report on its website on Nov. 2.

“The central bank will definitely keep pumping capital through reverse repos,” said Peng Hao, a bond analyst at Fudian Bank Co. in Kunming. “Reverse-repo operations are a more flexible tool than reserve-ratio cuts.”

The seven-day repurchase rate, which measures interbank funding availability, dropped four basis points to 3.33 percent as of 4:41 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, dropped two basis points to 3.21 percent, according to data compiled by Bloomberg.

The yield on the 2.95 percent government bonds due August 2017 rose six basis points, or 0.06 percentage point, to 3.21 percent, according to the Interbank Funding Center.

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

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net


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