China’s benchmark money-market rates slid for a ninth day, the longest run of declines since March, 2008, as lower reserve requirements boosted the availability of cash in the banking system.
The People’s Bank of China didn’t gauge demand today for bill sales tomorrow, according to a trader at a primary dealer required to bid at the auctions. The monetary authority assessed demand for 91-day repurchase agreements, the trader said.
“The big driver behind the move is a reduction in reserve requirements,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “The repo rate also suggests deposits are coming back to banks and there’s less tension in the system.”
The seven-day repo rate, a gauge of funding availability in the financial system, fell four basis points, or 0.04 percentage point, to 3.10 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The one-year swap rate, the fixed cost to receive the repo rate, decreased four basis points to 3.23 percent, poised for the lowest close in a month.
Deposits at China’s four biggest banks rose by 300 billion yuan ($48 billion) in the last three days of February, giving a monthly increase of 1.1 trillion yuan, 21st Century Business Herald reported yesterday, citing unidentified people. The People’s Bank of China reduced the proportion of cash that banks must set aside by half a percentage point to 20.50 percent from Feb. 24.
The finance ministry auctioned off 28 billion yuan of seven-year bonds at a yield of 3.41 percent today, according to Chinabond, the nation’s biggest bond clearing house website. The yield was lower than the median estimate of 3.44 percent in a Bloomberg News survey of nine fixed-income analysts and traders.
The yield on government bonds due February, 2022 was little changed at 3.548 percent, according to the National Interbank Funding Center.