China Overnight Rate Climbs Most in Three Months on Reserve-Ratio Increase

China’s overnight money-market rate jumped the most in three months as this year’s fourth increase in lenders’ reserve-requirement ratios took effect today, draining cash from the financial system.

The one-day repurchase rate, which measures interbank funding availability, rose to the highest level since Feb. 9 even as the central bank reined in debt issuance. The People’s Bank of China sold the least amount of three-month bills in seven weeks at an auction today and held off from offering 91- day repurchase agreements for the first time in more than two months.

“Banks are short of money after handing reserve-ratio payments to the central bank,” said Jiang Chao, a bond analyst in Shanghai at Guotai Junan Securities Co., the nation’s biggest brokerage by revenue. “The effect may be short-term because it’s not driven by speculation about more tightening measures.”

The overnight repo climbed 178 basis points, or 1.78 percentage point, to 3.55 percent as of 11:02 a.m. in Shanghai, the biggest jump since Jan. 20, according to a weighted average rate compiled by the National Interbank Funding Center. The benchmark seven-day repo jumped 94 basis points to 3.94 percent, the biggest increase since Feb. 21.

The central bank sold 10 billion yuan ($1.5 billion) of three-month bills at a yield of 2.9168 percent, unchanged for a second week, according to traders at primary dealers required to bid at the auctions. The monetary authority injected a net 94 billion yuan of capital to the debt market this week, compared with a withdrawal of 83 billion yuan in the five days through April 15, according to Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai.

One-year interest-rate swaps, the fixed cost needed to receive the floating seven-day repurchase rate, rose four basis points to 3.46 percent, according to data compiled by Bloomberg.

The yield on the 3.6 percent government bond due February 2016 gained one basis point to 3.46 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

--Judy Chen. Editor: James Regan

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at +86-21-6104-3043 or xchen45@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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