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China Money Rate Rises a Third Day on Cash Hoarding Speculation

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Dec. 27 (Bloomberg) -- China’s money-market rate climbed for a third day on speculation banks are hoarding cash to meet year-end capital requirements.

The seven-day repurchase rate, which measures interbank funding availability, rose even after the central bank injected a net 117 billion yuan ($18.8 billion) of funds into the financial system. The central bank kept the yields on seven- and 14-day reverse-repurchase contracts unchanged today at 3.35 percent and 3.45 percent, respectively.

“Demand for capital is high in the last few days of this year,” said Song Qiuhong, a bond trader at Foshan Shunde Rural Commercial Bank Co. in Foshan, a city in the southern Guangdong province. “It may decline once the year-end passes.”

The seven-day repurchase rate rose 36 basis points to 4.17 percent as of 4:30 p.m. in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It has dropped 143 basis points this year.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, dropped two basis points to 3.35 percent, according to data compiled by Bloomberg. The yield on the 2.95 percent government bonds due August 2017 rose one basis point, or 0.01 percentage point, to 3.25 percent, according to the Interbank Funding Center.

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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