China Money Rate Set for Weekly Drop as PBOC Injects Record Cash

China’s money-market rate was set for a weekly decline on speculation the central bank’s record capital injection this month will help increase cash supply.

The People’s Bank of China pumped a net 379 billion yuan ($60.7 billion) into the financial system this week, the most since Bloomberg started compiling the data in 2008. The central bank kept the yields on seven-, 14- and 28-day reverse- repurchase contracts unchanged at 3.35, 3.45 and 3.6 percent, respectively, in so-called open-market operations.

“PBOC’s capital injection helped meet surging cash demand around the end of October,” said Liu Junyu, a bond analyst at China Merchants Bank Co. in Shenzhen, the nation’s sixth biggest lender. “The seven-day repo rate probably won’t fall further because the central bank has refrained from lowering reverse- repo rates, showing its reluctance to push borrowing costs even lower.”

The seven-day repurchase rate, which measures interbank funding availability, dropped 35 basis points, or 0.35 percentage point, in the week to 3.37 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. The rate fell six basis points today.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed four basis points this week to 3.25 percent, according to data compiled by Bloomberg. The rate gained five basis points today.

The yield on the 2.95 percent government bond due January 2021 dropped eight basis points this week to 3.15 percent, according to the Interbank Funding Center. The yield slid seven basis points today.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net

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

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