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China Money Rate Rises for Third Day on Maturing Reverse Repos

China’s benchmark money-market rate rose for a third day as maturing reverse-repurchase agreements reduce cash in the financial system.

The People’s Bank of China injected 145 billion yuan ($22.8 billion) last week via seven-day reverse repos and offered 50 billion yuan of new contracts today at a yield of 3.35 percent, according to a trader at a primary dealer required to bid at the auctions.

“The size of maturing reverse repos is bigger than the new repos,” said Chen Qi, co-head of fixed-income research at UBS Securities Co. in Shanghai. “The market still expects a cut in reserve requirements and money rates could be more volatile in case they disappoint by further delaying a reserve-ratio cut.”

The seven-day repo rate, which measures interbank funding availability, increased seven basis points, or 0.07 percentage point, to 3.49 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The one-year interest-rate swap, the fixed cost to receive the seven-day repo, climbed three basis points to 2.65 percent, data compiled by Bloomberg show.

China’s central bank has lowered the amount of cash major banks must set aside by 150 basis points to 20 percent since November to help revive local demand and economic growth. China’s manufacturing teetered on the edge of contraction in July, signaling a rebound in the economy this year has yet to take hold.

The Purchasing Managers’ Index dropped to 50.1 last month from 50.2 in June, the Beijing-based National Bureau of Statistics and China Federation of Logistics and Purchasing said in a statement yesterday. That compares with the 50.5 median estimate in a Bloomberg News survey of 24 economists. Fifty is the dividing line between expansion and contraction.

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