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China’s Money Rate Increases This Week as Banks Boost Capital

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March 23 (Bloomberg) -- China’s benchmark money-market rate rose, halting a four-week decline, on speculation banks will boost capital to meet regulatory requirements before the end of the quarter.

The central bank drained a net 19 billion yuan ($3 billion) from the financial system this week after withdrawing 57 billion yuan last week, according to data compiled by Bloomberg. The monetary authority has refrained from issuing one-year and three-month bills since Dec. 27 and Dec. 22, respectively.

“Banks are trying to collect more cash to meet deposit and reserve requirements,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The seven-day repurchase rate may have another small increase next week.”

The repo rate, which measures interbank funding availability, climbed seven basis points this week to 2.97 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It declined 21 basis points today.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose two basis points in the five-day period to 3.17 percent, according to data compiled by Bloomberg. It was little changed today.

The yield on the 3.99 percent government bonds due June 2021 increased five basis points this week, or 0.05 percentage point, to 3.53 percent, according to the Interbank Funding Center. The yield fell two basis points today.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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