China’s benchmark money-market rate fell for a fourth day on speculation the central bank will ease monetary policy as the world’s second-largest economy slows.
A purchasing managers’ index for non-manufacturing industries fell to 57.7 last month from 59.3 in September, the China Federation of Logistics and Purchasing said on its website today. The central bank kept the yield on three-month bills unchanged at 3.1618 percent for a 10th sale today, according to a trader at a primary dealer required to bid at the auctions.
“Expectations are growing stronger that monetary policy will be eased,” said Zhang Dedong, a bond analyst at Bank of Beijing Co. in Beijing. “The economy may face a rapid slowdown at the end of this year and the beginning of next year.”
The seven-day repurchase rate, which measures interbank funding availability, dropped 31 basis points, or 0.31 percentage point, to 3.40 percent as of the 4:30 p.m. close in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center.
The People’s Bank of China added a net 96 billion yuan ($15 billion) of cash to the financial system this week, with maturing bills exceeding those being issued, according to Wee- Khoon Chong, a Hong Kong-based fixed-income strategist at Societe Generale SA. That was the first cash injection in three weeks, according to data compiled by Bloomberg.
The capital boost is meant to help banks set aside more money on Nov. 7 and Nov. 15 after policy makers broadened the scope of reserve requirements to include customers’ margin deposits in August, according to Bank of Beijing’s Zhang. Lenders may keep aside around 200 billion yuan on Nov. 7, he said.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, dropped 10 basis points to 3.30 percent, the lowest level since April 13, according to data compiled by Bloomberg.
The yield on the 3.83 percent government bond due January 2018 declined one basis point to 3.63 percent, according to the Interbank Funding Center.
--Judy Chen. Editors: Anil Varma, Andrew Janes
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