China Money Rate Drops to One-Month Low as PBOC Skips Bill Sales

China’s money-market rate dropped to the lowest level in a month on speculation the central bank will skip bill sales tomorrow, helping maintain cash supply.

The People’s Bank of China didn’t gauge demand today for three-month securities due to be sold tomorrow, a sign it won’t proceed with the auction, according to a trader at a primary dealer required to participate in the sale. The central bank has refrained from issuing three-month and one-year bills since Dec. 22 and Dec. 27, respectively.

“The suspension of bill sales is good news for the money market, while the bill redemption amount is very low this month,” said Wang Huane, a senior trader at Qilu Bank Co. in Jinan, the capital of eastern Shandong province. “There’s limited space for money-market rates to decline further.”

The seven-day repurchase rate, which measures interbank funding availability, dropped 18 basis points to 3.48 percent as of 4:46 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 3.2 percent earlier, the lowest level since Jan. 21, and has fallen 86 basis points in February.

A total of 254 billion yuan ($40.4 billion) of central bank bills and repurchase contracts will mature next month, compared with 12 billion yuan in February, according to China Merchants Bank Co.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, declined three basis points to 3.32 percent, according to data compiled by Bloomberg. It climbed 14 basis points, or 0.14 percentage point, this month.

The yield on the 3.01 percent government bonds due November 2012 dropped one basis point to 2.93 percent, according to the Interbank Funding Center.

--Judy Chen. With assistance from Fion Li in Hong Kong. Editors: Simon Harvey, Sandy Hendry

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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