China Money Rate Falls a Third Week on Signs PBOC to Ease Policy

China’s benchmark money-market rate completed a third weekly decline on speculation the central bank will ease monetary policy to support economic growth.

Banks in Shenzhen are joining lenders in Beijing and Shanghai in offering lower mortgage rates for first-home buyers amid loosened credit, the Securities Times reported today. Manufacturing may contract for a second month in December, a preliminary reading from a purchasing managers’ index reported by HSBC Holdings Plc and Markit Economics indicated yesterday.

“The market speculates the central bank will ease monetary policy as growth slows,” said Peng Hao, a bond analyst at Fudian Bank Co. in Kunming, capital of the southern Yunnan province. “But the seven-day repurchase rate may be quite volatile as the year-end approaches.”

The seven-day repo rate, which measures interbank funding availability, dropped 44 basis points this week to 3.08 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It fell 38 basis points, or 0.38 percentage point, today.

The People’s Bank of China mopped up a net 73 billion yuan ($11.5 billion) of capital this week as bill sales exceeded redemptions, compared with withdrawals of 101 billion yuan last week, according to data compiled by Bloomberg.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, fell four basis points this week to 2.72 percent, according to data compiled by Bloomberg. It slumped 13 basis points today, the biggest decline in more than two weeks.

The yield on the 3.99 percent government bond due June 2021 dropped three basis points this week to 3.46 percent, according to the Interbank Funding Center.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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