China Money Rate Drops Most in 2 Months This Week on Cash Supply

China’s money-market rate headed for the biggest weekly drop in almost two months on speculation the central bank is favoring increasing cash supply to help boost lending and support economic growth.

The seven-day repurchase rate, which measures interbank funding availability, declined for a sixth day after the People’s Bank of China suspended auctions of one-year and three- month bills this week. A total of 254 billion yuan ($40.3 billion) of central bank bills and repurchase agreements will mature this month, up from 12 billion yuan in February, according to China Merchants Bank Co.

“The central bank wants to ensure appropriately loose cash supply,” said Duan Su, a bond analyst at Yinzhou Bank Co. in Ningbo in eastern Zhejiang province. “High borrowing costs for banks have prevented them from offering loans at lower rates.”

The seven-day repo rate fell 120 basis points, or 1.2 percentage points, for the week to 3.28 percent as of 10:06 a.m. in Shanghai, the biggest decline since the five days through Jan. 6, according to a weighted average compiled by the National Interbank Funding Center. It was unchanged today.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, slipped four basis points from a week ago to 3.31 percent, according to data compiled by Bloomberg. It was unchanged today.

The yield on the 3.94 percent government bonds due January 2021 rose two basis points this week to 3.55 percent, according to quotes provided by the Interbank Funding Center. The yield dropped one basis point today.

--Judy Chen. Editors: Simon Harvey, 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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