China’s benchmark money-market rate rose to a three-week high on speculation banks will hoard cash to meet demand before the Lunar New Year holiday next month.
The People’s Bank of China sold 80 billion yuan ($12.9 billion) of seven-day reverse-repurchase contracts today, according to a trader required to bid at the auctions. The yield was kept at 3.35 percent, unchanged from the previous sale, the trader said. China’s financial markets will be shut from Feb. 11-15 for the weeklong holiday.
“Liquidity will be a bit tight before holiday,” said Wang Huane, a senior bond trader at Qilu Bank Co. in Jinan, the capital of Shandong province. “The reverse-repo operations will help prevent money-market rates from rising too high.”
The seven-day repurchase rate, which measures interbank funding availability, gained 16 basis points to 3.14 percent as of 10:06 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 3.16 percent earlier, the highest level since Jan. 8.
The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose one basis point to 3.19 percent, according to data compiled by Bloomberg.
To contact Bloomberg News staff for this story: Judy Chen in Shanghai at email@example.com