China’s overnight money-market rate climbed the most this month on speculation cash supply will wane as banks hoard funds to meet customer withdrawals before the Lunar New Year holiday that starts Feb. 11.
The People’s Bank of China added 58 billion yuan ($9.3 billion) to the financial system today via seven-day reverse repurchase contracts at a yield of 3.35 percent, according to a trader required to bid at the auctions. China’s manufacturing may have expanded at a faster pace this month, a private survey of companies showed today.
“The rising overnight rate reflects the holiday effect,” said Song Qiuhong, a bond analyst at Foshan Shunde Rural Commercial Bank Co. in Foshan, a city in the southern province of Guangdong.
The one-day repurchase rate, which measures interbank funding availability, rose 12 basis points, or 0.12 percentage point, to 2.07 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That’s the biggest increase since Dec. 31.
The central bank drained a net 49 billion yuan from the markets this week, according to data compiled by Bloomberg.
The preliminary reading of a manufacturing Purchasing Managers’ Index was 51.9 in January, compared with the 51.5 final reading for December, according to a statement from HSBC Holdings Plc and Markit Economics today. Fifty is the dividing line between expansion and contraction.
The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined three basis points to 3.19 percent, according to data compiled by Bloomberg. The yield on the 2.95 percent government bonds due August 2017 rose one basis point to 3.24 percent, according to the Interbank Funding Center.