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China Money Rate Climbs Most in a Month as Banks Build Reserves

China’s benchmark money-market rate climbed the most in more than a month on speculation banks are hoarding cash to meet reserve requirements.

The People’s Bank of China gauged demand for sales of 91-day bills this week, according to a primary dealer required to bid at the auctions. The central bank also asked banks to submit orders for 28-day repurchase contracts and seven- and 14-day reverse-repurchase agreements, the trader said.

“Banks need to park reserves with the central bank by Aug. 5,” said Kumar Rachapudi, a senior rates strategist in Singapore at Australia & New Zealand Banking Group Ltd. “Banks will be accumulating cash to make that payment. They would be less willing to lend in the interbank market. So typically money-market rates are higher.”

The seven-day repurchase rate, which measures interbank funding availability, climbed 71 basis points, or 0.71 percentage point, to 5.12 percent as of 4:39 p.m. in Shanghai, after increasing 65 basis points last week, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest increase since June 20, when the rate reached a record 12.45 percent amid a cash squeeze.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose five basis points to 4.08 percent in Shanghai, according to data compiled by Bloomberg.

The State Council, under Premier Li Keqiang, requested the National Audit Office to conduct a review of government borrowings, according to a statement on the audit office’s website yesterday, which didn’t provide details.

The first audit of local government debt found liabilities of 10.7 trillion yuan ($1.7 trillion) at the end of 2010, the Audit Office said in June 2011.

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