China Money Rate Climbs to Six-Week High Ahead of Quarter-End

China’s money-market rate jumped to the highest level in six weeks on speculation banks will hoard cash as they prepare to meet quarter-end capital requirements.

The finance ministry sold at least 30 billion yuan ($4.7 billion) of 10-year bonds at an average yield of 3.3958 percent, according to a trader at a finance company that participates in government debt auctions. That compared with the median estimate of 3.40 percent in a Bloomberg survey. The central bank cut the benchmark lending rate by 25 basis points on June 8 to help boost lending and support growth.

“China’s banks probably have extended a big amount of loans this month, so they need more capital to meet quarter-end loan-deposit ratio requirements,” said Hu Hangyu, a bond analyst at Citic Securities Co., the nation’s third-biggest brokerage by assets.

The seven-day repurchase rate, which measures interbank funding availability, increased 44 basis points to 3.45 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. That was the highest level since May 9.

“The repo probably won’t rise to a level of more than 3.50 percent because demand for cash will ease in early July,” Hu said.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped one basis point to 2.67 percent, according to data compiled by Bloomberg.

The yield on the 3.51 percent government bond due February 2022 was unchanged at 3.41 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Ven Ram, James Regan

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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