China Money Rate Declines to Three-Week Low as Inflation Slows

China’s overnight money-market rate dropped to the lowest level in three weeks on speculation the central bank will maintain an ample supply of cash after inflation slowed in October.

The People’s Bank of China added a total of 186 billion yuan ($29.9 billion) via seven- and 28-day reverse-repurchase agreements to the financial system today, according to a statement on its website. Consumer prices climbed 1.7 percent from a year earlier, the least since January 2010, the statistics bureau reported on Nov. 9.

“The reverse repos are the major source of capital for the financial market,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “Short-term cash supply is abundant.”

The one-day repurchase rate, which measures interbank funding availability, dropped 20 basis points to 2.33 percent as of 4:50 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.30 percent earlier, the lowest level since Oct. 23.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined one basis point to 3.19 percent, according to data compiled by Bloomberg.

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

The yield on the 2.95 percent government bonds due August 2017 rose one basis point, or 0.01 percentage point, to 3.16 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Simon Harvey, Andrew Janes

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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