China Overnight Rate Falls Most in 7 Weeks as Cash Squeeze Eases

China’s overnight money-market rate fell the most in seven weeks on signs the central bank is boosting efforts to ease a cash squeeze in the financial system.

The People’s Bank of China added a total 220 billion yuan ($34.6 billion) via seven- and 14-day reverse-repurchase agreements yesterday, according to a statement on its website. The monetary authority also gauged demand for an issuance of such contracts tomorrow, according to a trader required to bid at the auctions.

“Cash shortage may ease temporarily,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “But the bigger the amount of reverse repos this week, the bigger the redemption next week.”

The one-day repurchase rate, which measures interbank funding availability, dropped 41 basis points, or 0.41 percentage point, to 3.09 percent as of 4:30 p.m. in Shanghai, the biggest decline since July 4, according to a weighted average rate compiled by the National Interbank Funding Center.

China’s finance ministry sold 30 billion yuan of 10-year bonds today at an average yield of 3.39 percent, according to a statement on Chinabond’s website. The yield compared with the 3.365 percent median forecast in a Bloomberg News survey of 10 fixed-income analysts and traders. The sale drew 1.35 bids times the amount on offer, according to the statement.

The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repo rate, rose seven basis points to 3.23 percent, according to data compiled by Bloomberg. The yield on the 3.51 percent government bond due February 2022 increased four basis points to 3.40 percent, according to the Interbank Funding Center.

— With assistance by Judy Chen

Before it's here, it's on the Bloomberg Terminal. LEARN MORE