China’s Overnight Rate in Longest Rising Streak Since October

China’s overnight money-market rate climbed for a seventh day, the longest stretch in five months, after the central bank drained cash from the financial system.

The overnight repurchase rate, a gauge of funding availability among banks, climbed nine basis points, or 0.09 percentage point, to 2.95 percent as of 4:46 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. It touched 2.96 percent earlier, the highest since March 20. The seven-day repo rate fell one basis point to 4.20 percent.

The People’s Bank of China absorbed 72 billion yuan ($11.6 billion) issuing repurchase agreements yesterday, having pulled a net 974 billion yuan since the Lunar New Year break at the beginning of February. Xuzhou Zhongsen Tonghao New Board Co., a closely held Chinese building materials company in Jiangsu province, failed to pay interest on bonds due March 28, the 21st Century Business Herald reported yesterday. China had its first default in the domestic bond market last month when Shanghai Chaori Solar Energy Science & Technology Co. failed to pay interest due March 7.

“We expect to see money-market interest rates increasing and staying at higher levels in the coming months,” Credit Suisse Group AG economists led by Hong Kong-based Dong Tao wrote in a research report today. “The creation of domestic liquidity through foreign inflows is likely to weaken, trust funds are entering the peak season for repayments and we expect to see a higher frequency of credit events.”

The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, rose two basis points to 4.38 percent, data compiled by Bloomberg show. It touched 4.40 percent earlier, the highest level since March 20.

The PBOC asked lenders to submit orders for 14- and 28-day repo agreements, 14-day reverse-repo contracts and 91-day bills that may be issued tomorrow, according to a trader at a primary dealer required to bid at the auctions.

The yield on the 4.42 percent government bonds due March 2024 was 4.54 percent, according to data from the National Interbank Funding Center.