China Money Rate Declines to One-Month Low on Foreign Inflows

China’s money-market rate fell to a one-month low on speculation rising foreign inflows are boosting the supply of cash.

The People’s Bank of China gauged demand for three-month bills today, after issuing 27 billion yuan ($4.4 billion) of the securities yesterday, according to a trader required to bid at the auctions. Yuan positions at Chinese financial institutions stemming from foreign-exchange transactions, a gauge of cross-border flows, rose 1.22 trillion yuan in the first three months of 2013, more than four times as much as in the same period last year, the latest central bank data show.

“The rising foreign capital inflows are probably one of the reasons supporting liquidity,” said Song Qiuhong, a bond analyst at Foshan Shunde Rural Commercial Bank Co. in Foshan, a city in the southern province of Guangdong.

The seven-day repurchase rate, which measures interbank funding availability, dropped three basis points to 2.77 percent as of 11:40 a.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It touched 2.5 percent earlier, the lowest level since April 10.

The central bank also asked lenders to submit orders for 28-day repurchase contracts and 14-day reverse-repurchase agreements, said the trader.

Premier Li Keqiang said there is limited room for using stimulus and direct government investment to achieve China’s development targets for this year, according to a transcript published last night on the government’s website.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined one basis point, or 0.01 percentage point, to 3.24 percent, according to data compiled by Bloomberg.

--Judy Chen. Editors: Andrew Janes, Anil Varma

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

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

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