China’s benchmark money-market rate fell for a third day after a report signaled a pickup in capital inflows and the central bank gauged demand for cash.
The rate touched a one-week low after data published by the People’s Bank of China showed local banks bought a record net 684 billion yuan ($110 billion) of foreign currencies in January, an indication of larger inflows. The PBOC gauged demand for a sale of 14-day reverse-repurchase contracts tomorrow, according to a trader at a primary dealer required to bid at the auctions. It also asked banks to submit orders for 28-day repurchase agreements, the trader said.
“We have seen a return of capital inflows into the market,” said Tommy Xie, a China economist at Oversea-Chinese Banking Corp. in Singapore. “The PBOC remains flexible in managing liquidity and definitely doesn’t have a tightening bias, at least for this quarter.”
The seven-day repurchase rate, which measures interbank funding availability, fell 19 basis points, or 0.19 percentage points, to 3 percent as of 9:49 a.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It reached 2.98 percent earlier, the lowest level since Feb. 20.
The PBOC refrained from injecting or withdrawing cash from the banking system yesterday, after absorbing 915 billion yuan from markets since March 8.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, fell two basis points to 3.24 percent, according to data compiled by Bloomberg.
The yield on the 2.81 percent government bonds due January 2014 dropped two basis points to 2.74 percent, according to the Interbank Funding Center.
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