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China Repo Rate Climbs Most in 10 Weeks as Cash Demand Rises

China’s benchmark money-market rate jumped the most in more than 10 weeks on speculation demand for cash is rising as banks prepare to meet quarter-end requirements.

The People’s Bank of China sold 20 billion yuan ($3.1 billion) of 28-day repurchase agreements today at a yield of 2.75 percent, unchanged from a week ago, according to a trader at a primary dealer required to bid at the auctions. The central bank also auctioned 60 billion yuan of three-month deposits on behalf of the Ministry of Finance at a yield of 3.23 percent, compared with 6.15 percent at the last sale in September 2011.

“We think market cautiousness is likely to remain ahead of the half year-end,” Ju Wang, a strategist at Barclays Capital in Singapore, wrote in a research report today. “We expect more easing before growth sees sustained improvement.”

The seven-day repurchase rate, a gauge of funding availability in the financial system, rose 41 basis points, the most since April 5, to 2.98 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the highest level since May 14.

Home values fell in a record 54 of 70 cities tracked by the government in May, data showed yesterday, as the eastern city of Wenzhou led declines with a 14 percent slump from a year earlier. This data “continues to suggest sluggishness in the economy,” Ju said.

Financial institutions’ yuan positions stemming from foreign-exchange transactions with the monetary authority rose 23.4 billion yuan in May, data showed today. That compared with a decline of 60.6 billion yuan in April and a 2011 average purchase of 231.6 billion yuan. When the PBOC buys dollars the positions increase and when it sells the currency they fall.

The one-year swap rate, the fixed cost needed to receive the seven-day repurchase rate, increased five basis points to 2.65 percent in Shanghai, according to data compiled by Bloomberg. The yield on the 2.87 percent government bonds due February 2013 was little changed at 2.176 percent.

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