China Repo Rate Jumps Most in a Week on Quarter-End Cash Demand

China’s money-market rate rose the most in a week as banks retain funds to prepare for cash-reserve requirements at the end of the quarter.

The People’s Bank of China will conduct 30 billion yuan ($4.8 billion) of 28-day repurchase agreements today, according to a trader at a primary dealer required to bid at the auctions. The monetary authority drained a net 57 billion yuan from the financial system this week through repurchase operations, taking total withdrawals to more than 1 trillion yuan in the past six weeks, according to data compiled by Bloomberg.

“Any upward spike should be temporary” in relation to seasonal demand for banks’ cash-reserve requirements, said Becky Liu, a China rates strategist in Hong Kong at Standard Chartered Plc. “I don’t really see liquidity being tightened.”

The seven-day repurchase rate, which measures funding availability in the interbank market, climbed 29 basis points to 3.15 percent at 10:38 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

Yao Jingyuan, a researcher at the Counselors’ Office of the State Council, said China faces relatively large downward economic pressure in the middle of this year, Shanghai Securities News reported today.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, fell one basis point to 3.27 percent, according to data compiled by Bloomberg.

The yield on the 3.52 percent government bonds due February 2023 declined two basis points, or 0.02 percentage point, to 3.54 percent, according to the Interbank Funding Center.

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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