PBOC Suspends Bill Sale as Money Rates Rise Before Holiday
Dec. 28 (Bloomberg) -- David Blanchflower, a professor at Dartmouth College and a Bloomberg Television contributing editor, talks about the need for more quantitative easing by central banks and the outlook for emerging-market economies. Blanchflower speaks with Sara Eisen and Scarlet Fu on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
The People’s Bank of China refrained from selling three-month bills (PBOC3M) for a second week today, helping stem increases in money-market rates as banks hoard cash in the run-up to the Chinese New Year holiday.
The central bank didn’t gauge demand for the securities, according to two traders who declined to be identified because the information isn’t public. The monetary authority will boost the availability of cash by cutting lenders’ reserve requirements (CHRRDEPC) before the week-long holiday starts on Jan. 23, economists at Barclays Capital and Bank of America Corp. predict.
“With no bill or repo sales, this week sees a net injection of 51 billion yuan ($8.1 billion),” said Wee-Khoon Chong, a fixed-income strategist at Societe Generale SA in Hong Kong. “It will help, but may be not enough to bring fixings lower.”
The seven-day repurchase rate (CNRR007), a gauge of funding availability in the financial system, rose 51 basis points to 4.51 percent in Shanghai, based on a daily fixing by the National Interbank Funding Center. It reached a five-month high of 5.60 percent on Dec. 30 before sliding 1.60 percentage points yesterday after Premier Wen Jiabao said business conditions may be “relatively difficult” this quarter and monetary policy will be fine-tuned as needed.
The central bank cut the amount of cash that lenders must set aside as reserves for the first time since 2008 last month as Europe’s debt crisis dimmed the outlook for exports and growth.
The one-year swap rate, the fixed cost to receive the seven-day repo rate, jumped nine basis points to 3.07 percent. The yield on the government’s 3.55 percent bond due October 2016 rose three basis points, or 0.03 percentage point, to 3.06 percent, according to the Interbank Funding Center.
To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.
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