China’s overnight money-market rate climbed to a seven-month high on speculation cash shortages will worsen as banks hoard funds to meet quarter-end capital requirements and demand for holiday withdrawals.
The People’s Bank of China gauged demand for 14- and 28-day reverse-repurchase contracts this week, according to a trader required to bid at the auctions. The central bank used money-market operations to inject a net 101 billion yuan ($16 billion) of capital last week to ease the cash crunch. China’s financial markets will close from Oct. 1 for the weeklong National Day and Mid-Autumn holiday.
“Cash supply will get very tight during the last week of this month,” said Peng Hao, a bond analyst at Fudian Bank Co. in Kunming, capital of the southern Yunnan province. “The crunch may start to ease on the last day when banks finish borrowing all the money they need.”
The one-day repurchase rate, which measures interbank funding availability, rose 10 basis points to 4.39 percent as of 4:40 pm. in Shanghai, the highest since Feb. 24, according to a weighted average rate compiled by the National Interbank Funding Center.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined six basis points to 3.23 percent, according to data compiled by Bloomberg. The seven-day repo rate rose eight basis points to 4.51 percent, the highest level since June, a weighted average showed.
The yield on the 2.95 percent government bond due August 2017 climbed two basis points to 3.30 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.