China’s government bonds fell on speculation the central bank will refrain from adding funds to the financial system this week to prevent an overheating of the nation’s property market.
The People’s Bank of China gauged demand for sales this week of 28- and 91-day repurchase contracts, which drain money from markets, and not for reverse-repo agreements that are used to inject cash, according to a trader required to bid at the auctions. In a report on Feb. 6, the PBOC signaled inflation and the housing market remain concerns and said it will maintain a prudent monetary policy.
“The central bank will probably conduct only repo operations this week because there is so much money in the banking system,” said He Weisheng, a Shanghai-based strategist at Citigroup Inc. “The PBOC is probably concerned about overheating risks in the property market.”
The yield on the 3.15 percent bonds due January 2018 increased two basis points, or 0.02 percentage point, to 3.27 percent as of 4:30 p.m. in Shanghai, according to the Interbank Funding Center. China’s interbank bond market reopened on Feb. 16 after the weeklong Lunar New year holiday.
The seven-day repurchase rate, which measures interbank funding availability, was little changed at 2.91 percent, according to a weighted average rate compiled by the National Interbank Funding Center.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, was steady at 3.13 percent, according to data compiled by Bloomberg.