China Money Rate Declines for Third Day as Cash Crunch Eases
China’s money-market rate declined for a third day on speculation a cash shortage is easing as the central bank reins in efforts to drain funds from the financial system.
The People’s Bank of China didn’t offer any repurchase agreement today, according to a statement on Chinabond, the nation’s biggest debt clearing house. The seven-day repurchase rate, a gauge of interbank funding availability, also declined as some smaller banks got a portion of their reserve-requirement payments back from the central bank yesterday to reflect their shrinking deposits, according to Shi Lei, a bond analyst at Ping An Securities Co., a unit of the nation’s second-biggest insurance company.
“The cash shortage is improving as the central bank drains less capital,” said Beijing-based Shi. “Cash supply will improve more later this week as a total of 34 billion yuan of central bank bills and repos will mature on Thursday and Friday.”
The seven-day repo dropped 25 basis points to 5.03 percent as of the 4:30 p.m. close in Shanghai, after sliding 65 basis points in the last two trading days, according to a weighted average rate compiled by the National Interbank Funding Center. A basis point is 0.01 percentage point.
The central bank kept the yield on one-year bills unchanged at 3.4982 percent for a fourth week, according to a statement on Chinabond. It issued 1 billion yuan ($155 million) of the securities, the least in more than a month.
Chinese banks meet reserve-requirement ratios by parking more funds with the People’s Bank of China on the 5th, 15th and 25th of each month if their deposit holdings expand. They get refunds if their deposits decline.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed two basis point to 4.24 percent, according to data compiled by Bloomberg. It touched 4.31 percent on July 22, the highest level in Bloomberg data going back to 2006.
The yield on the 3.48 percent government bond due July 2012 was unchanged at 3.80 percent, according to the Interbank Funding Center.
--Judy Chen. Editors: James Regan, Andrew Janes
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: Sandy Hendry at shendry@bloomberg.net.
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