China’s overnight money-market rate dropped for a second day on speculation the central bank will inject capital to prevent cash shortage before national holidays.
The People’s Bank of gauged demand for possible auctions of seven-, 14- and 28-day reverse-repurchase contracts this week, according to a trader required to bid at the auctions. The central bank injected a net 92 billion yuan ($14.8 billion) into the financial system using money-market operations last week, according to data compiled by Bloomberg.
“Liquidity is quite stable,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth biggest lender. “Banks are expecting the central bank to offer reverse repos if there is a jump in cash demand.”
The one-day repurchase rate, which measures interbank funding availability, dropped 12 basis points to 2.30 percent as of 10:25 a.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center.
Demand for cash climbs before the weeklong break for Chinese New Year commences Feb. 11, a period in which families exchange gifts and get together for meals. China also has a three-day holiday starting Jan. 1.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, gained one basis points to 3.36 percent, according to data compiled by Bloomberg.
--Judy Chen. Editors: James Regan, Anil Varma
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