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China Money Rate Rises to Two-Week High on Month-End Cash Demand

China’s overnight money-market rate climbed to a two-week high as cash demand increased before the month-end and holidays this week.

The People’s Bank of China pulled 50 billion yuan ($8 billion) from the financial system today by issuing 28-day repurchase agreements at 4 percent, according to a trader at a primary dealer required to bid at the auctions. That indicates a net injection of 91 billion yuan this week, with 141 billion yuan of repo contracts maturing in the period, data compiled by Bloomberg show. Financial markets in China will be closed May 1-2 for public holidays.

“Month-end and pre-holiday cash demand is prompting the central bank to add liquidity,” said Lin Yijian, a Guangzhou-based analyst at Guangzhou Rural Commercial Bank Co. “Given the central bank’s intention to keep money rates stable, there is limited upside for the rates.”

The overnight repurchase rate, a gauge of interbank funding availability, gained 13 basis points, or 0.13 percentage point, to 2.57 percent as of 10:29 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That is the highest level since April 14. The seven-day repo rate rose four basis points to 4.06 percent.

While the average seven-day repo rate in May may be slightly higher than in April, it will probably stay below 4 percent as the PBOC keeps fund supply relatively ample, economists led by Ting Lu at Bank of America Corp. wrote in a note today.

Rate Swaps

The cost of the one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repurchase rate, declined one basis point to 3.82 percent, data compiled by Bloomberg show.

Thirty of China’s 31 provinces and municipalities reported growth lower than their targets in the first quarter, according to data published by government websites and newspapers. China’s economy expanded 7.4 percent in the first quarter, the least since 2012, an official report showed on April 16.

The yield on the 4.42 percent government bonds due March 2024 rose one basis point to 4.34 percent, data from the National Interbank Funding Center showed.

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

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

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