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China Money Rate Climbs on Cash Squeeze as Reverse Repos Mature

China’s benchmark money-market rate rose for a second day as maturing reverse-repurchase agreements outweighed fund injections by the central bank, causing a cash squeeze in the financial system.

About 400 billion yuan ($64 billion) of reverse repos are due this week, draining funds from the system, according to Weisheng He, a strategist at Citigroup Inc. The People’s Bank of China sold 42 billion yuan of 28-day contracts at a yield of 3.6 percent today, according to a trader at a primary dealer required to bid at the auctions. It also offered 49 billion yuan of seven-day agreements at 3.35 percent, the trader said.

“On a net basis, about 100 billion yuan of reverse repos are set to mature so that causes a bit of liquidity tightness in the money market,” Citigroup’s He said by telephone from Shanghai.

The seven-day repurchase rate, a gauge of funding availability in the financial system, rose 20 basis points, or 0.20 percentage point, to 2.92 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, increased five basis points to 3.17 percent, according to data compiled by Bloomberg. The yield on 3.39 percent government bonds due August 2022 climbed two basis points to 3.54 percent, according to the National Interbank Funding Center.

To contact Bloomberg News staff for 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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