China Money Rate Jumps to Two-Week High After Cash Deposit Sale

China’s money-market rate rose to a two-week high after the central bank sold cash deposits at the highest yields since October, spurring concern the supply of funds will decline as the quarter-end approaches.

The People’s Bank of China sold 50 billion yuan ($7.9 billion) of six-month treasury deposits at commercial banks on behalf of the Ministry of Finance at a yield of 6.8 percent, according to a trader required to bid at the sales. That matches the 6.8 percent yield at the last sale of similar-maturity deposits on Feb. 23, the second-highest level since the auctions started in 2006.

The cash deposit “result might create some volatility, and the quarter-end might see seven-day repurchase rate fixings to be under small and temporary upside pressure,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. He forecast the cash deposits to be auctioned at or below a yield of 6.1 percent.

The seven-day repurchase rate, which measures interbank funding availability, increased nine basis points to 3.18 percent as of 4:52 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It touched 3.20 percent, the highest since March 5.

The central bank sold 20 billion yuan of 91-day repurchase contracts in a separate sale today, according to a statement on its website. The yield was unchanged at 3.14 percent.

The monetary authority drained a net 19 billion yuan of capital from the financial market this week, compared with a withdrawal of 57 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, declined two basis points to 3.18 percent, according to data compiled by Bloomberg. The yield on the 3.99 percent government bond due June 2021 was steady at 3.55 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Andrew Janes, Anil Varma

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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