The People’s Bank of China sold 15 billion yuan ($2.4 billion) of 91-day repos at 3.05 percent today, according to a trader at a primary dealer required to bid at the auctions. The yield was 3.14 percent a week ago. The monetary authority cut the rate on 28-day repos by five basis points to 2.75 percent on June 12.
“As the liquidity outlook remains bumpy ahead of the half- year end, the repo curve will struggle to go down much further,” said Weisheng He, a fixed-income strategist at Citigroup Inc. in Shanghai. “I feel the market is still looking for a reserve-requirement cut in the near term.”
The seven-day repurchase rate, a gauge of funding availability in the financial system, traded at 2.70 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It earlier fell as much as three basis points, or 0.03 percentage point.
Slowing inflation will provide room for the PBOC to lower its 28- and 91-day repo rates in open-market operations, Jiang Fei, an analyst at China Merchants Securities, wrote in a note to clients today. In 2008, the central bank cut the 28-day repo rate to 0.9 percent, below banks’ funding costs, in order to force lenders to extend loans or buy bonds amid deflation.
The People’s Bank of China will auction 60 billion yuan of three-month treasury deposits to commercial banks on June 19, according to a statement on its website today. The finance ministry said it will sell 30 billion yuan of 10-year government bonds on June 20, according to its website.
The one-year swap rate, the fixed cost needed to receive the seven-day repurchase rate, fell two basis points to 2.57 percent in Shanghai, according to data compiled by Bloomberg. The yield on 2.87 percent government bonds due February 2013 declined one basis point to 2.158 percent.
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