China Injects Record 860 Billion Yuan via Reverse Repos in Week

China injected a record 860 billion yuan ($138 billion) into the financial system using reverse- repurchase agreements this week to meet rising demand for cash before a weeklong holiday starts Feb. 11.

The People’s Bank of China injected 410 billion yuan using 14-day reverse repos today, after adding 450 billion yuan on Feb. 5. The overnight money-market rate climbed for an eighth day, the longest run of increases in almost a year. The Chinese New Year holiday is a period in which families exchange gifts, buy new clothes and get together for meals.

“The PBOC injection is in reaction to liquidity needs,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “It is natural for cash demand to pick up before the Chinese New Year.”

The one-day repurchase rate, a gauge of interbank funding availability, rose two basis points, or 0.02 percentage point, to 3.65 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate increased as much as 49 basis points earlier to 4.12 percent, the highest since Oct. 29. The seven-day repo rate jumped 37 basis points to 4.10 percent today, the biggest gain this year.

The monetary authority offered the 14-day reverse repos at a yield of 3.45 percent, according to a trader at a primary dealer required to bid at the auctions.

China must be alert to changes in price-gain expectations and to imported inflation, the central bank said yesterday in its fourth-quarter monetary policy report. The costs of labor- intensive products, services and agricultural goods may rise persistently on slowing labor-supply growth, the PBOC said.

The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repo rate, was steady at 3.16 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.