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China Money Rate Set for Biggest Weekly Decline in Five Weeks

Dec. 7 (Bloomberg) -- China’s money-market rate dropped this week as the central bank added capital to the financial market for the first time in five weeks.

The People’s Bank of China injected a net 11 billion yuan ($1.8 billion), compared with a withdrawal of 40 billion yuan last week, data compiled by Bloomberg show. A government report on Dec. 9 may show consumer prices climbed 2.1 percent in November from a year earlier, the fastest pace in five months, according to the median estimate in a Bloomberg News survey of 35 economists.

“The injection in open-market operations has helped bring down the seven-day repurchase rate,” said Wang Huane, a bond analyst at Qilu Bank Co. in Jinan, capital of eastern Shandong province. “There is also speculation that foreign capital is flowing into the nation, which also increases money supply.”

The seven-day repo rate, which measures interbank funding availability, declined 34 basis points this week to 3.04 percent as of 4:30 p.m. in Shanghai, the biggest decline since the five days through Nov. 2, according to a weighted average compiled by the National Interbank Funding Center. It rose 15 basis points today.

The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped four basis points, or 0.04 percentage point, to 3.41 percent this week, according to data compiled by Bloomberg. The contracts climbed two basis points today.

The yield on the 2.95 percent government bond due August 2017 gained nine basis points this week to 3.27 percent, according to the Interbank Funding Center. The yield was unchanged 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.

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