China’s benchmark money-market rate fell for the first time in four days on speculation cash supply will improve as the central bank adds funds to the financial system.
The People’s Bank of China injected 10 billion yuan ($1.6 billion) yesterday via seven-day reverse-repurchase agreements at 3.9 percent, according to a statement on its website. The PBOC asked lenders to submit orders today for 14-day reverse repos and 28-day repo contracts, and gauged demand for 91-day bills, according to a trader at a primary dealer required to bid at the auctions.
“It’s extremely unlikely for China to have another interbank liquidity crunch in the near future,” Zhi Xiaojia and Lu Ting, Hong Kong-based economists at Bank of America Merrill Lynch, wrote in a report. “Interbank rates may inch up in the second half of September, but most likely the PBOC will do whatever it can to prevent a possible liquidity squeeze.”
The seven-day repo rate, a gauge of funding availability in the banking system, declined 15 basis points, or 0.15 percentage point, to 3.48 percent as of 10:44 a.m. in Shanghai, a weighted average compiled by the National Interbank Funding Center showed. Chinese markets will be shut during Sept. 19-20 for the mid-Autumn festival and Oct. 1-7 for the National Day holidays.
The cost of one-year interest rate swap contracts, the fixed payment to receive the floating seven-day repo rate, was unchanged at 4.16 percent, data compiled by Bloomberg show.
China may accelerate the opening of its capital account to achieve sustainable economic growth, according to a commentary in China Securities Journal by reporter Ren Xiao.
The yield on the government’s 4.08 percent bonds due August 2023 increased six basis points to 4.15 percent, according to prices from the Interbank Funding Center.
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