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China Money Rate Sees Biggest Weekly Increase Since February

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Sept. 21 (Bloomberg) -- China’s overnight money-market rate had the biggest weekly advance in seven months on speculation banks are hoarding cash to meet quarter-end requirements.

The one-day repurchase rate climbed to a seven-month high even after the central bank stepped up offerings of reverse-repurchase agreements to add funds to the financial system. The People’s Bank of China issued a total of 235 billion yuan ($37.3 billion) of the contracts this week, compared with 132 billion yuan in the five days ended Sept. 14, according to data compiled by Bloomberg.

“The cash crunch may get even worse next week,” said Chen Lan, a bond analyst in Shanghai at Guotai Junan Securities Co., the nation’s biggest brokerage by revenue. “But the central bank’s reverse-repo operations may help ease the shortage.”

The one-day repo rate, which measures interbank funding availability, rose 161 basis points, or 1.61 percentage points, in the week to 4.29 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest five-day increase since February. The rate climbed 28 basis points today.

The central bank will auction 40 billion yuan of six-month deposits on Sept. 25 on behalf of the finance ministry, according to a statement on its website yesterday.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repurchase rate, gained one basis point this week to 3.25 percent, according to data compiled by Bloomberg. It rose two basis points today.

The yield on the 2.95 percent government bonds due August 2017 dropped two basis points this week to 3.28 percent, according to the Interbank Funding Center. The yield fell one basis point today.

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net