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China Money Rate Drops to Eight-Day Low, Supporting Demand for New Debt
China’s benchmark money-market rate fell to the lowest in more than a week, spurring demand from banks for government debt at a one-year auction today.
The finance ministry sold 20.54 billion yuan ($3 billion) of the securities at an average yield of 1.87 percent, one basis point lower than the median estimate in a Bloomberg News survey of 13 finance companies. The sale drew bids 1.98 times the offered amount, the highest among similar-dated auctions this year.
“Banks, which have sufficient cash in hand, prefer shorter-term securities when the economic outlook remains uncertain,” said Chen Liang, a Shenzhen-based fixed-income analyst at Guohai Securities Co. “The central bank will keep sufficient money supply during the national holidays starting Sept. 22.”
The seven-day repurchase rate, which measures lending costs between banks, dropped three basis points, or 0.03 percentage point, to 2.24 percent, the lowest level since Aug. 27, according to a daily fixing rate published by the National Interbank Funding Center.
The People’s Bank of China sold 56 billion yuan of one-year bills yesterday in open-market operations, the biggest amount since April 27. The yield remained unchanged for a 13th straight week at 2.0929 percent.
Government bonds were little changed before the government starts reporting major economic data for August from tomorrow.
Consumer prices rose 3.5 percent in August from a year ago, according to a Bloomberg survey of 30 economists. That would compare with 3.3 percent in July. The statistics bureau is scheduled to announce the figures on Sept. 13.
The yield on the 3.28 percent note due in August 2020 was at 3.266 percent, and the price of the security was 100.1163 per 100 yuan face amount, Interbank Funding Center data showed.
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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