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China Repo Rate Rises to One-Month High Before Public Holiday

China’s benchmark money-market rate rose to a one-month high on speculation financial institutions are hoarding cash before the end of the month.

The seven-day repurchase rate, a gauge of cash availability in the financial system, climbed for a fourth day this week ahead of a three-day public holiday that starts on April 2.

“Liquidity typically gets tighter toward month-end as people need money for their reporting or regulatory purposes,” said Matthew Huang, a rates strategist at Macquarie Group Ltd. in Singapore. Still, rates are “at very muted levels and don’t show any signs of stress in the money market,” he said.

The repo rate increased 20 basis points today and 74 basis points this week to 3.71 percent as of 4:40 p.m. in Shanghai, the highest level since Feb. 27, according to a weighted average compiled by the National Interbank Funding Center.

The gauge slid 189 basis points, or 1.89 percentage points, this quarter, the most in a year, as the People’s Bank of China reduced banks’ reserve requirements twice since December to support a slowing economy.

China’s manufacturing index dropped to 50.8 in March from 51 a month earlier, according to the median estimate of 23 analysts in a Bloomberg survey before statistics bureau data due on April 1. Fifty is the dividing line between contraction and expansion.

Premier Wen Jiabao pledged on March 5 to fine-tune policies and “appropriately adjust” credit to support growth along a “tortuous” road to recovery for the global economy. Central bank Governor Zhou Xiaochuan said the following week that the nation has scope to lower banks’ reserve requirements further.

The one-year swap rate, the fixed cost needed to receive the seven-day repurchase rate, rose one basis point to 3.14 today, extending this quarter’s advance to 22 basis points, according to data compiled by Bloomberg.

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