China’s benchmark money-market rate climbed the most in almost two weeks on concern fund supply will decline as banks hoard cash to meet reserve requirements and companies pay taxes.
The seven-day repurchase rate, a gauge of interbank funding availability, rose 58 basis points, or 0.58 percentage point, to 3.60 percent as of 4:46 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the biggest jump since March 27, after the rate fell 107 basis points on April 4. Financial markets in China were closed yesterday for a public holiday.
Lenders in China need to park reserves with the central bank today while corporate tax outflows are due this month. The People’s Bank of China drained 63 billion yuan ($10.1 billion) from the market today by selling repurchase contracts, according to a statement on its website. Some 232 billion yuan of repo agreements will mature this week, releasing money into the financial system.
“Required reserves and tax payments are adding pressure on the market,” said Song Qiuhong, an analyst at Shunde Rural Commercial Bank Co. in Guangdong province. “But I don’t expect the rates to spike this week, given the large amount of maturing repos.”
The overnight repo rate was little changed at 2.73 percent. The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, dropped two basis points to 4.29 percent, data compiled by Bloomberg show.
The PBOC sold 16 billion yuan 28-day repos at 4 percent and 47 billion yuan 14-day contracts at 3.8 percent today, according to the statement.
China won’t rely on a large stimulus package like the one that followed the 2008 global financial crisis to boost its economy, according to a commentary from Xinhua News Agency written by Zhang Zhengfu. Talk about an incoming package of measures is “misleading” and those anticipating it will likely be “disappointed,” according to the commentary.
The yield on 10-year government bonds was at 4.6 percent, compared with 4.55 percent on April 3, according to the National Interbank Funding Center.