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China Overnight Rate Drops Most in 7 Weeks After PBOC Adds Funds

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Dec. 21 (Bloomberg) -- China’s overnight money-market rate dropped the most in seven weeks on speculation the central bank will step up cash injections into the financial system to help lenders meet year-end capital requirements.

The People’s Bank of China pumped in a net 92 billion yuan ($14.8 billion) in the past week via reverse-repurchase operations, after withdrawing 125 billion yuan in the preceding period, data compiled by Bloomberg show. It offered 60 billion yuan of seven-day reverse-repo agreements and 33 billion yuan of 14-day contracts yesterday.

“We aren’t as nervous as in previous year-ends,” said Wang Huane, a senior bond trader at Qilu Bank Co. in Jinan, capital of the eastern Shandong province. “If there is a shortage of cash, we can ask the PBOC for reverse repos.”

The one-day repurchase rate, which measures interbank funding availability, dropped 24 basis points to 2.42 percent as of 10:25 a.m. in Shanghai, the biggest drop since Nov. 2, according to a weighted average rate compiled by the National Interbank Funding Center. It rose 15 basis points this week.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed one basis point to 3.36 percent, according to data compiled by Bloomberg. It was unchanged from a week ago.

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