Chinese lenders paid the highest rate of interest since June to borrow government funds today, reflecting tighter monetary conditions in the world’s second-largest economy.
The People’s Bank of China auctioned 30 billion yuan ($4.9 billion) of three-month treasury deposits on behalf of the Ministry of Finance at 6 percent, according to a statement on its website. Interest-rate swaps and money-market rates also advanced as the central bank refrained from adding funds via reverse-repurchase agreements.
“People are surprised the PBOC refrained from conducting reverse repos today, and the treasury deposit auction result came higher than expected,” said Li Liuyang, chief financial market analyst at Bank of Tokyo-Mitsubishi UFJ (China) Ltd. in Shanghai. “All these indicate liquidity is tight.”
The seven-day repurchase rate, a gauge of funding availability in the banking system, climbed 55 basis points, or 0.55 percentage point, to 4.29 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It reached 4.50 percent earlier, the highest level since Nov. 1.
The cost of one-year swaps, the fixed payment needed to receive the floating seven-day repo rate, rose for the first time in three days, increasing seven basis points to 4.43 percent, data compiled by Bloomberg show. It touched 4.44 percent on Nov. 11, the highest since June.
The yield on the 4.08 percent government bonds due August 2023 climbed two basis points to 4.52 percent, according to data from the Interbank Funding Center. That was the highest for a benchmark 10-year sovereign note since August 2008, according to ChinaBond data.