China’s Repo Rate Drops Most in Six Months as PBOC Injects Cash

China’s benchmark money-market rate fell the most in six months as the central bank pumped money into the financial system, helping ease a cash shortage.

The People’s Bank of China conducted 55 billion yuan ($8.7 billion) of seven-day reverse-repurchase operations today at 3.40 percent, the same rate as when they were last used on Aug. 30, according to a trader at a primary dealer required to bid at the auctions. It also injected 40 billion yuan using 14-day contracts at 3.50 percent, down from 3.55 percent last time.

“Overnight money has been flush for quite some time and banks are possibly feeling comfortable enough to lend,” said Kumar Rachapudi, a strategist at Barclays Plc in Singapore.

The seven-day repo rate, a gauge of interbank funding availability, slid 88 basis points, the most since Feb. 24, to 2.50 percent in Shanghai, a weighted average shows. The rate reached 4.10 percent on Aug. 16, the highest level since July 3, and has averaged 3.58 percent this year.

Industrial and Commercial Bank of China Ltd., China Construction Bank Corp. (939), Bank of China Ltd. and Agricultural Bank of China Ltd. (601288) made about 220 billion yuan of new loans last month, in line with July’s total, 21st Century Business Herald reported today, without saying where it got the information.

The one-year interest-rate swap, the fixed cost to receive the seven-day repurchase rate, declined 13 basis points, or 0.13 percentage point, to a two-week low of 2.96 percent in Shanghai, according to data compiled by Bloomberg. The yield on 2.91 percent government bonds due April 2015 fell two basis points to 2.87 percent, according to Chinabond data.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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