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Money-Market Rate in China Drops Most in 7 Weeks, Boosts New Debt Demand
China’s overnight money-market rate dropped the most in seven weeks, driving up banks’ demand for short-term debt securities.
The seven-day repurchase rate, which measures lending costs between banks, also posted the biggest decline in six weeks, as the central bank injected cash for a second week in open-market operations to ensure ample money availability. The finance ministry’s two auctions of debt due in a year and less drew the highest bids among similar-dated sales this year.
“Money availability is pretty easy and bigger banks prefer to borrow on overnight terms, which have lower rates,” said Wang Yintao, a Shanghai-based money trader at Industrial Bank Co. “Ample cash spurred the demand for short-term treasury debt because of favorable yields compared with central bank bills.”
The overnight repurchase rate slid 42 basis points in the last five days, the most since the week ended July 11, to 1.57 percent, according to a daily fixing rate published by the National Interbank Funding Center. The seven-day repo rate dropped five basis points this week to 2.29 percent. A basis point is 0.01 percentage point.
The People’s Bank of China has added a net 71 billion yuan ($10.5 billion) during the week, the biggest injection since the week ended July 8.
The finance ministry sold 10 billion yuan of 91-day bills today, drawing bids worth 1.63 times the offered amount, the highest among similar-dated sales this year. The average 1.6462 percent yield at the auction compared with 1.5704 percent on 91- day central bank bills. The agency’s one-year debt sale earlier in the week attracted orders 1.98 times the planned issue amount of 20 billion yuan.
Government bonds due in three years and longer fell on speculation inflation quickened in August.
Consumer prices rose 3.5 percent last month from a year earlier, according to the median estimate in a Bloomberg survey of economists. That would be the biggest increase since October 2008. The data are due on Sept. 11.
The yield on the 3.28 percent bond due in August 2020 climbed three basis points during the week to 3.26 percent, and the price of the security lost 0.22 per 100 yuan face amount to 100.16, Interbank Funding Center data showed.
--Belinda Cao. Editors: Sandy Hendry
To contact the reporter on this story: Belinda Cao in Beijing at lcao4@bloomberg.net
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