China’s benchmark money-market rate dropped to the lowest level in a week on speculation slowing economic growth and easing inflation will give the central bank more leeway to loosen monetary policy.
Government data last week showed China’s gross domestic product grew 9.1 percent last quarter, the least since 2009. Isaac Meng, portfolio manager at Pacific Investment Management Co., said in Sydney today that the pace of expansion may cool to 7 percent in the next 12 months. China must continue efforts to control food and housing prices, Premier Wen Jiabao said Oct. 22.
“I think there is a policy shift toward growth, but they don’t want to let inflation expectations go,” said Frances Cheung, a senior strategist at Credit Agricole CIB in Hong Kong. “In the near term, there will be neither major tightening nor loosening.”
The seven-day repurchase rate, a gauge of funding availability in the financial system, fell four basis points, or 0.04 percentage point, to 3.39 percent as of 10:46 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate touched 3.1 percent earlier, the lowest level since Oct. 14.
A total of 477 billion yuan ($74.8 billion) of bills and bonds may mature in October, more than last month’s 441 billion yuan, Cheung estimated. In November, 225 billion yuan will come due, she said.
Official data issued on Oct. 14 showed inflation moderated to 6.1 percent last month after reaching a three-year high of 6.5 percent in July. Production capacity in manufacturing has seen an “obvious slowdown,” People’s Bank of China Governor Zhou Xiaochuan said in an online webcast on Sina.com.
The market will continue to see whether there is any further change in the central bank’s bill auction yields this week, according to a report today by Ju Wang at Barclays Capital.
The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, was unchanged at 3.51 percent.
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