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China Overnight Repo Rate Gains a Ninth Day as PBOC Drains Funds

China’s overnight money-market rate rose for a ninth day, the longest stretch since March, as the central bank drained funds from the financial system.

The People’s Bank of China sold 10 billion yuan ($1.6 billion) of 91-day bills today at a yield of 2.9089 percent, said a trader at a primary dealer required to bid at the auctions. The PBOC also offered 9 billion yuan of 28-day repurchase agreements at 2.75 percent, according to a statement on its website. The central bank withdrew 35 billion yuan last week after recommencing sales of the short-term securities on May 9 for the first time since December 2011.

The one-day repurchase rate, a gauge of funding availability, climbed 38 basis points to 3.42 percent in Shanghai, according to the National Interbank Funding Center. That’s the highest level since April 25.

“Tight liquidity will stay into month-end ahead” of the three-day holiday for the Dragon Boat Day festival starting June 10, according to Wee-Khoon Chong, a Societe Generale SA strategist in Hong Kong.

A total of 158 billion yuan of repurchase agreements and central bank bills are set to mature this week, which will temper gains in market rates, according to Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong.

“The drainage from open-market operations wasn’t much, compared with the huge amount of maturing bills,” Cheung said. “The repo rate is not too tight.”

The seven-day repo rate rose six basis point, or 0.06 percentage point, to 4.44 percent. The one-year interest-rate swap, the fixed cost to receive the seven-day repurchase rate, fell two basis points to 3.27 percent, data compiled by Bloomberg show.

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