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China Repo Rises on Speculation PBOC Favoring Stable Money Rates

Nov. 19 (Bloomberg) -- China’s money-market rate climbed, rebounding from the lowest level since June, on speculation the central bank will seek to keep funding costs stable.

The People’s Bank of China gauged demand for sales of seven-, 14- and 28-day reverse-repurchase contracts this week, together with 28- and 91-day repurchase agreements, according to a trader at a primary dealer required to bid at the auctions. The PBOC pulled a net 75 billion yuan ($12 billion) out of the financial system in the seven days through Nov. 15, the second weekly withdrawal, according to data compiled by Bloomberg.

“People just don’t see much downside in the seven-day repo rate,” said Weisheng He, a Citigroup Inc. strategist in Shanghai. Authorities “will keep the seven-day reverse repo rate stable,” he said.

The seven-day repurchase rate, a gauge of interbank funding availability, rose 29 basis points to 3.20 percent as of 4:35 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.3 percent earlier, the lowest since June 8.

China’s new home prices rose in October in more cities than the previous month, indicating the government will refrain from relaxing curbs on the property market. Prices climbed in 35 of the 70 cities the government tracks, compared with 31 in September, according to data from the statistics bureau yesterday. The cost of new homes fell in 17 cities.

The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, added two basis points to 3.24 percent, according to data compiled by Bloomberg. The yield on 3.39 percent government bonds due August 2022 fell two basis points, or 0.02 percentage point, to 3.49 percent, according to data from the Interbank Funding Center.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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