China’s overnight money-market rate rose to the highest level in a month on speculation a cash shortage will worsen as banks hoard funds to meet month-end capital requirements.
The People’s Bank of China gauged demand for sales of seven-, 14- and 28-day reverse-repurchase contracts this week, according to a trader at a primary dealer required to bid at the auctions. The authority is “much less” inclined to cut lenders’ reserve requirements given growth in their foreign-currency positions, as well as increases in money supply and trust lending, according to a front-page commentary in Financial News today.
“It’s most likely the month-end effect,” said Wee-Khoon Chong, a strategist at Societe Generale SA in Hong Kong. “The money rates will remain high over the next three days but there won’t be long-term pressure on the market.”
The one-day repurchase rate, a gauge of interbank funding availability, jumped 102 basis points, or 1.02 percentage point, to 4.49 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the highest level since Sept. 25.
The central bank also asked banks to submit orders for 28-and 91-day repurchase contracts today, according to the trader who declined to be identified because the information isn’t public.
The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, fell two basis points to 3.19 percent in Shanghai, according to data compiled by Bloomberg.