China’s money-market rate dropped by the most in a week on speculation capital inflows will increase as yuan appreciation quickens.
The currency strengthened 0.11 percent this week, a second straight five-day gain, as a purchasing managers’ index showed China’s manufacturing may have expanded in November for the first time in 13 months. The People’s Bank of China drained a net 24 billion yuan ($3.9 billion) from the banking system, a third week of withdrawals, according to data compiled by Bloomberg.
“The decline in the repurchase rate is a surprise today given the central bank withdrew funds this week,” said Wang Huane, a senior trader at Qilu Bank Co. in Jinan, the capital of eastern Shandong province. “Financial institutions are abundant with cash. It’s probably because inflows are rising and the finance ministry is depositing money at banks for year-end expenditure.”
The seven-day repo rate, which measures interbank funding availability, dropped 40 basis points to 2.84 percent as of 4:30 p.m. in Shanghai, the lowest level since Oct. 22, according to a weighted average compiled by the National Interbank Funding Center. The benchmark was six basis points lower for the week.
The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, declined two basis points to 3.33 percent, according to data compiled by Bloomberg.
Yuan positions at local banks accumulated from sales of foreign exchange to the PBOC, an indicator of cross-border capital flows to China, rose 21.6 billion yuan in October, a second monthly gain, a central bank statement showed Nov. 16.
The yield on the 3.10 percent government bonds due September 2015 climbed two basis points to 2.98 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.
--Judy Chen. Editors: Simon Harvey, Anil Varma
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