China Money-Market Rate Drops a Fifth Day as PBOC Injects Cash

Jan. 8 (Bloomberg) -- China’s money-market rate declined to a three-week low as the central bank injected cash into the financial system through reverse-repurchase agreements. Government bonds advanced.

The People’s Bank of China offered 20 billion yuan ($3.2 billion) of seven-day reverse repurchase contracts at a yield of 3.35 percent today and 18 billion yuan of 28-day agreements at 3.6 percent, according to a statement on its website. The authority added 90 billion yuan through a similar auction at 3.3 percent on Jan. 5.

“There could be strong cash demand for corporate trade settlement and also bonus payments for the Lunar New Year,” said Jackit Wong, a regional economist at Natixis Asia Ltd. in Hong Kong. “I see some room for monetary easing this year to lower financing costs and support economic growth.”

The seven-day repurchase rate, which measures interbank funding availability, dropped six basis points, or 0.06 percentage point, to 3.11 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The five-day drop, totaling 147 basis points, is the longest easing stretch since July 12. Economists forecast the PBOC will lower banks’ reserve-requirement ratios by 50 basis points in the first half of this year, according to the median forecast in a Bloomberg News survey published on Dec. 19.

The one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, fell two basis points to 3.37 percent, according to data compiled by Bloomberg. It reached 3.47 percent on Jan. 4, the highest since November 2011.

The yield on the 2.95 percent government bonds due August 2017 dropped one basis point to 3.17 percent, according to the Interbank Funding Center.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net