China Overnight Rate Drops to 1-Week Low as Cash Shortage Eases

China’s overnight money-market rate dropped to the lowest level in more than a week on optimism a record fund injection last week by the central bank has helped ease a cash shortage in the financial system.

The People’s Bank of China added 277 billion yuan ($44.3 billion) today via reverse-repurchase contracts, according to a trader required to bid at the auctions. It provided 395 billion yuan a week ago, the most according to Bloomberg data going back to 2004. The lower reverse-repo amount shows cash demand eased, said Liu Junyu, a bond analyst at China Merchants Bank Co.

“Short-term liquidity has improved a lot,” said Liu in Shenzhen at China Merchants, the nation’s sixth-biggest lender.

The one-day repurchase rate, which measures interbank funding availability, dropped 16 basis points, or 0.16 percentage point, to 2.54 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It touched 2.51 percent earlier today, the lowest since Oct. 25.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined two basis points to 3.18 percent, according to data compiled by Bloomberg.

The yield on the 2.95 percent government bond due August 2017 dropped six basis points to 3.15 percent, according to the Interbank Funding Center.

— With assistance by Judy Chen

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