China’s money-market rate had the biggest weekly drop in almost two months on speculation the central bank is favoring increasing cash supply to help boost lending and support economic growth.
The seven-day repurchase rate, which measures interbank funding availability, declined for a sixth day after the People’s Bank of China suspended auctions of one-year and three-month bills this week. A total of 254 billion yuan ($40.3 billion) of central bank bills and repurchase agreements will mature this month, up from 12 billion yuan in February, according to China Merchants Bank Co.
“The central bank wants to ensure appropriately loose cash supply,” said Duan Su, a bond analyst at Yinzhou Bank Co. in Ningbo in eastern Zhejiang province. “High borrowing costs for banks have prevented them from offering loans at lower rates.”
The seven-day repo rate fell 120 basis points, or 1.2 percentage points, for the week to 3.28 percent as of 4:30 p.m. in Shanghai, the biggest decline since the five days through Jan. 6, according to a weighted average compiled by the National Interbank Funding Center. It was unchanged today.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repo rate, slipped two basis points from a week ago to 3.33 percent, according to data compiled by Bloomberg. It rose two basis points today.
The yield on the 3.94 percent government bonds due January 2021 climbed four basis points this week to 3.57 percent, according to quotes provided by the Interbank Funding Center. The yield increased one basis point today.