China’s 10-year government bonds fell, pushing the yield to a one-month high, as the central bank scaled back cash injections into the financial system.
The People’s Bank of China added 10 billion ($1.6 billion) to markets via seven-day reverse-repurchase contracts today, according to a statement on its website. That compares with an injection of 65 billion yuan a week ago. The authority rolled over 5.5 billion yuan of maturing three-year notes, according to a statement yesterday. Bonds also dropped after data showed yesterday that inflation was at a seven-month high in September.
“The central bank wants to keep money supply tightly balanced, so it cut the reverse-repo sales once the rates came down,” said Liu Wenbo, an analyst at Shanghai Cifco Futures Co. “September’s inflation raised concern that CPI in the fourth quarter is likely to be higher, which may keep the yield of government bonds at an elevated level.”
The yield on the 4.08 percent bonds due August 2023 climbed three basis points to 4.13 percent, the highest since Sept. 13, as of 4:37 p.m. in Shanghai, according to data from the Interbank Funding Center. It added five basis points, or 0.05 percentage point, yesterday.
China’s consumer-price index rose 3.1 percent from a year earlier in September, the statistics bureau said yesterday. That compares with a 2.6 percent gain in August and the median estimate of 2.8 percent in a Bloomberg News survey.
China may face greater inflationary pressures next year if the global economic recovery accelerates, according to a China Securities Journal commentary.
The cost of the one-year interest-rate swap, the fixed payment to receive the floating seven-day repo rate, dropped three basis points to 3.94 percent, the lowest since Sept. 26, data compiled by Bloomberg show.
The seven-day repurchase rate, a gauge of funding availability in the banking system, rose three basis points to 3.85 percent, according to a weighted average compiled by the National Interbank Funding Center.