China Repo Rate Falls Most in 2 Months on Record Cash Injection

China’s benchmark money-market rate fell the most in two months after China pumped in a record 860 billion yuan ($138 billion) into the financial system to meet cash demand before next week’s holidays.

The People’s Bank of China injected 410 billion yuan using 14-day reverse-repurchase contracts yesterday, after adding 450 billion yuan on Feb. 5. The monetary authority pumped in a net 662 billion yuan into the financial system this week. China’s financial markets will be shut for a week starting Feb. 11 for the Lunar New Year break.

The seven-day repurchase rate, which measures interbank funding availability, declined 57 basis points, the most since Dec. 4, to 3.53 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate rose 20 basis points this week.

“The repo rate is finally showing some signs of stabilization after a record amount of liquidity injection this week,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “We expect the seven-day repo rate to normalize into the 2.50 percent to 3.50 percent range as the market reopens” after the holidays, he said.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, dropped two basis points, or 0.02 percentage point, to 3.13 percent, according to data compiled by Bloomberg. It fell five basis points this week.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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