China’s benchmark money-market rate fell, snapping a six-day advance, on optimism the availability of cash will improve after a cut in lenders’ reserve-requirement ratios.
The People’s Bank of China said over the weekend that it will reduce the proportion of cash that banks must set aside by half a percentage point to 20.5 percent from Feb. 24. The reduction may add 400 billion yuan ($64 billion) to the financial system, according to ANZ Banking Group Ltd. The monetary authority won’t sell any repurchase contracts or bills today, according to a trader at a primary dealer required to bid at the auctions.
“I expect that the liquidity injection from the reserve-requirement-ratio cut will push repo rates down,” said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong. “Liquidity conditions will then ease in March,” he said, adding that he was forecasting reserve ratios to be lowered by another 200 basis points this year.
The seven-day repurchase rate, a gauge of funding availability in the financial system, fell 12 basis points to 5.25 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.
The monetary authority has suspended sales of one-year and three-month bills this year to help boost money supply.
The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, rose one basis point, or 0.01 percentage point, to 3.32 percent, according to data compiled by Bloomberg. The yield on the 3.93 percent government bonds due August 2021 climbed one basis point to 3.53 percent today.