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China Money Rate Drops a Fourth Day as PBOC Offers Reverse Repos

Jan. 7 (Bloomberg) -- China’s money-market rate dropped for a fourth day on speculation the central bank’s injections of cash through reverse-repurchase agreements will help meet demand for funds in the financial system.

The People’s Bank of China gauged investor appetite for seven-, 14- and 28-day reverse repos scheduled for this week, according to a trader required to bid at the auctions. The monetary authority added 90 billion yuan ($14.4 billion) of capital via five-day reverse repos on Jan. 5 at a yield of 3.3 percent, according to a statement on its website.

“The market is confident that the reverse-repo operations will help cover all the money demand,” said Liu Junyu, a Shenzhen-based bond analyst at China Merchants Bank Co., the nation’s sixth-biggest lender. “Also, the cash shortage is over since the holidays and year-end have passed.”

The seven-day repurchase rate, which measures interbank funding availability, dropped 33 basis points to 3.17 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, declined four basis points to 3.41 percent, according to data compiled by Bloomberg.

The yield on the 2.95 percent government bonds due August 2017 fell one basis point, or 0.01 percentage point, to 3.19 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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