China Money Rate Rises Before Smaller Banks’ Reserves Payments

China’s money-market rate climbed for a second day on speculation smaller banks are retaining capital to prepare for additional reserves payments tomorrow.

The seven-day repurchase rate, a benchmark for interbank funding availability, rose even after the central bank suspended one-year bill sales for a seventh week. Smaller lenders will set aside more funds as reserves following the broadening of the requirement-ratio base to include margin deposits, according to Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai.

“The reserve payment has only a temporary impact on money supply,” said Liu Junyu, a Shenzhen-based bond analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. “The suspension of bill sales shows the central bank wants to ensure proper liquidity supply.”

The seven-day repurchase rate gained 13 basis points to 3.79 percent as of 4:51 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It touched 4 percent, the highest level since Feb. 2.

The central bank sold 6 billion yuan ($953 million) of 28- day repurchase contracts today, according to a statement on its website.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped one basis point, or 0.01 percentage point, to 3.27 percent, according to data compiled by Bloomberg. The yield on the 3.44 percent government bond due June 2016 climbed one basis point to 3.11 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Sandy Hendry, Ven Ram

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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