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China’s Money Rate Drops as Treasury Bills Mature; Swaps Steady

China’s money-market rate dropped from a two-week high amid maturing government bills and as the central bank prepares to offer reverse-repurchase contracts this week that add funds to the banking system.

Two treasury bills come due today, injecting 30 billion yuan ($4.8 billion), according to data compiled by Bloomberg. The People’s Bank of China asked banks on the need for seven- and 14-day reverse repos, said a trader at a primary dealer required to bid at the auctions who declined to be identified because the information isn’t public.

The seven-day repurchase rate, which measures interbank funding availability, dropped 32 basis points, or 0.32 percentage point, to 3.04 percent as of 11:37 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

“The maturing bills plus other sources of inflows are a possible reason” for the lower repo rate, said Becky Liu, a China rates strategist in Hong Kong at Standard Chartered Plc.

The central bank hasn’t issued reverse-repurchase agreements since Feb. 7. The PBOC also asked lenders today to submit orders for 28-day repurchase contracts that drain funds, the trader said.

The seven-day repo rate climbed 88 basis points last week as the central bank mopped up 44 billion yuan from the system through repurchase operations, taking the withdrawals to 964 billion yuan in the last four weeks.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, was little changed at 3.27 percent, according to data compiled by Bloomberg. It rose six basis points last week.

The yield on the 2.91 percent government bonds due April 2015 held at 3.07 percent, according to the Interbank Funding Center, the least in a week.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

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