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China Money Rate Set for Weekly Increase as Banks Boost Capital

China’s money-market rate was set for its first weekly increase in a month on speculation banks will boost capital to meet regulatory requirements before the end of the quarter.

The central bank drained a net 19 billion yuan ($3 billion) from the financial system this week after withdrawing 57 billion yuan last week, according to data compiled by Bloomberg. The monetary authority has refrained from issuing one-year and three-month bills since Dec. 27 and Dec. 22, respectively.

“Banks are trying to collect more cash to meet deposit and reserve requirements,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The seven-day repo may have another small increase next week.”

The seven-day repurchase rate, which measures interbank funding availability, climbed eight basis points this week to 2.98 percent as of 10:22 a.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It declined 20 basis points today.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose one basis point in the five-day period to 3.16 percent, according to data compiled by Bloomberg. It dropped one basis point today.

The yield on the 3.99 percent government bonds due June 2021 increased six basis points this week, or 0.06 percentage point, to 3.54 percent, according to the Interbank Funding Center. The yield fell one basis point today.

--Judy Chen. Editors: Ven Ram, 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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