China’s benchmark money-market rate rose by the most this month as the central bank refrained from adding funds even as dealers expect tax payments and pre-holiday demand to reduce the supply of cash.
The People’s Bank of China didn’t issue 14-day reverse-repurchase agreements today, the second week it hasn’t injected any money, according to data compiled by Bloomberg. Commercial lenders usually need to park corporate tax payments with the central bank in the month after the end of the quarter, cutting the supply of funds in the interbank market. There is also likely to be an increase in demand for cash before the Chinese New Year holidays, which start from Jan. 31.
“Some dealers had expected the PBOC to inject via 14-day reverse repos today, as it would help banks to pass the difficult pre-holiday period,” said Chen Long, a bond analyst at Bank of Dongguan Co. in the southern Guangdong province. “Rates spiked because the market is starting to worry about the situation next week.”
The seven-day repurchase rate, a gauge of cash availability in the banking system, jumped 33 basis points to 4.35 percent as of 4:19 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That was the biggest increase since Dec. 31. The rate fell to 3.93 percent yesterday, the lowest since Nov. 13.
The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repurchase rate, rose nine basis points, or 0.09 percentage point, to 5.01 percent. That was the biggest increase since Jan. 2.
The yield on the 4.08 percent government bonds due August 2023 climbed two basis points to 4.62 percent, according to the Interbank Funding Center.
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