China’s Money-Market Rate Set for Biggest Weekly Drop Since July

China’s benchmark money-market rate headed for the biggest weekly drop since July after the central bank stepped up fund injections into the financial system.

The People’s Bank of China added a net 59 billion ($9.7 billion) this week after withdrawing money in the two preceding periods, according to data compiled by Bloomberg. It offered 14-day reverse-repurchase contracts yesterday for the first time this month, pumping in 33 billion yuan into the financial system, the largest amount since October.

The seven-day repurchase rate, a gauge of funding availability in the banking system, fell 78 basis points, or 0.78 percentage point, to 4.67 percent as of 10:02 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest decline since the five days ended July 5. It slid 24 basis points today.

“While liquidity might ease in December as government spending picks up, seasonal patterns suggest further episodes of tighter liquidity at end-December and then again at end-January heading into the Chinese New Year holidays,” Citigroup Inc.’s Singapore-based analysts Gaurav Garg and Siddharth Mathur wrote in a research report yesterday.

China’s central government usually transfers fiscal funds to local administrations during November and December, boosting cash available at commercial banks.

The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, added two basis points this week to 4.56 percent, according to data compiled by Bloomberg. It declined five basis points today.

The yield on the 4.08 percent government bonds due August 2023 slipped two basis points today to 4.68 percent, according to data from the Interbank Funding Center. The rate climbed eight basis points from a week ago.

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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