China’s money-market rate declined on speculation the central bank will loosen monetary policy to ease a quarter-end cash shortage.
The People’s Bank of China sold 95 billion yuan ($15 billion) of 14-day reverse-repurchase agreements yesterday at a yield of 4.2 percent, according to a trader at a primary dealer required to bid at the auctions. The monetary authority didn’t gauge demand for bill or repurchase-contract sales tomorrow, suggesting it won’t withdraw funds from the financial system, another trader at a primary dealer said today.
“Without a reserve-requirement cut in the near term, the improvement in banks’ funding is likely to be very gradual,” Ju Wang, a Barclays Capital strategist in Singapore, wrote in a research note today. “In addition to the usual negative fiscal impact at quarter-end, large banks’ dividend payments in early July are also likely to add to pressure on liquidity.”
The seven-day repurchase rate, a gauge of funding availability in the financial system, decreased five basis points to 4.25 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate fell as much as 1.43 percentage points earlier, the most since Feb. 24 last year.
Daiwa Securities Group Inc. cut its second-quarter growth forecast for China to 7.8 percent from 8.2 percent, which would be the lowest since the first three months of 2009, and its 2012 growth estimate to 8.3 percent from 8.4 percent, analysts Mingchun Sun and Chi Sun wrote in a research note today. The economic data is scheduled to be released on July 13.
The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, decreased three basis points to 2.62 percent, according to data compiled by Bloomberg. The yield on 3.51 percent government bonds due February 2022 fell 13 basis points, or 0.13 percentage point, to 3.32 percent, according to the Interbank Funding Centre.