China Money Rate Surges to Seven-Month High as Quarter-End Nears

China’s money-market rate surged to the highest level in seven months amid speculation banks are hoarding cash to meet quarter-end regulatory requirements and holiday withdrawals.

The overnight repurchase rate climbed for a fourth day even after the People’s Bank of China injected a net 101 billion yuan ($16 billion) into the financial system this week, ending a three-week run of withdrawals. The central bank today conducted 55 billion yuan of seven-day and 105 billion yuan of 28-day reverse-repurchase operations to add funds. China’s financial markets will be shut for a weeklong break from Oct. 1.

“Cash supply has become quite tight as the holiday and quarter-end approaches,” said Hu Hangyu, a Beijing-based bond analyst at Citic Securities Co., the nation’s biggest listed brokerage. “Even though the central bank has stepped up injections, it can’t prevent a cash crunch.”

The one-day repurchase rate, a gauge of interbank funding availability, climbed 49 basis points to 4.01 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It earlier touched 4.02 percent, the highest since Feb. 24, and a 58 basis point jump yesterday was the biggest since June.

The yields on seven- and 28-day reverse repos were kept unchanged at 3.35 percent and 3.6 percent, respectively, according to a central bank statement.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, fell four basis point to 3.23 percent, according to data compiled by Bloomberg.

The yield on the 2.95 percent government bond due August 2017 dropped one basis point to 3.29 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

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