China Repo Rate Falls to 5-Week Low as Zhou Says Policy Stable

China’s benchmark money-market rate fell to a five-week low on speculation the central bank will refrain from tightening policy in the short term.

The monetary stance is “stable overall” and able to support the nation’s economic-growth target for this year, People’s Bank of China Governor Zhou Xiaochuan said yesterday at the National People’s Congress meeting in Beijing. China will complete a once-in-a-decade leadership handover this month with Xi Jinping taking over as president and Li Keqiang as premier.

“Policy makers still remain accommodative,” said Hu Yifan, chief economist and head of research at Haitong Securities Co. in Hong Kong. “Inflation is still very low and the new leadership will take off very soon and keep policies supportive of the economy in the beginning of the year.”

The seven-day repurchase rate, which measures interbank funding availability, fell 45 basis points, or 0.45 percentage point, to 2.53 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.49 percent earlier, the lowest level since Jan. 29.

The rate has fallen 190 basis points this week as PBOC data released March 5 showed local banks bought a record net 684 billion yuan ($110 billion) of foreign currencies in January, an indication of larger capital inflows.

The monetary authority conducted 5 billion yuan of 28-day repurchase agreements today at a yield of 2.75 percent, according to a statement posted on the central bank’s website.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, fell three basis points to 3.22 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

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