China Money-Market Rate Climbs as Banks Hoard Cash; Yuan Steady

China’s money-market rate climbed for a second day on speculation banks are hoarding cash to meet year-end capital requirements and holiday withdrawals. The yuan was little changed.

The People’s Bank of China gauged demand today for seven- and 14-day reverse-repurchase contract operations tomorrow, according to a trader required to bid at the auctions. It injected 110 billion yuan ($17.6 billion) yesterday by offering 28-day reverse repos.

“Year-end need is pushing up the rates,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “But the increase will soon stop after the year-end passes.”

The seven-day repurchase rate, which measures interbank funding availability, rose nine basis points to 3.81 percent as of 4:40 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It has dropped 179 basis points this year.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed two basis points to 3.36 percent, according to data compiled by Bloomberg.

The yield on the 2.95 percent government bonds due August 2017 fell two basis points, or 0.02 percentage point, to 3.24 percent, according to the Interbank Funding Center.

The yuan traded at 6.2353 per dollar, compared with 6.2339 yesterday, according to the China Foreign Exchange Trade System. The central bank weakened the reference rate by 0.02 percent to 6.2943, the lowest level since Nov. 19. One-month implied volatility, a measure of expected moves in exchange rates used to price options, was unchanged 1.85 percent.

Twelve-month non-deliverable forwards fell 0.07 percent to 6.3365 per dollar, a 1.6 percent discount to the onshore spot rate, according to data compiled by Bloomberg. In Hong Kong’s offshore market, the yuan dropped 0.1 percent to 6.2315.

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

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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