April 22 (Bloomberg) -- China’s benchmark money-market rate climbed the most in two weeks as tax payments drained funds from the financial system.
The seven-day repurchase rate, a gauge of interbank funding availability, surged 36 basis points, or 0.36 percentage point, to 3.07 percent as of 4:16 p.m. in Shanghai, based on a weighted average by the National Interbank Funding Center. That was the biggest increase since April 8.
“Tax payments this week are likely to drive the seven-day repo to around 4 percent,” said Hong Ben, an analyst at Ningbo city-based Yinzhou Bank in Zhejiang province. “We continue to expect a net withdrawal in open-market operations, which could put further pressure on the market.”
Banks need to park corporate tax payments at the central bank in the month after the quarter-end and this often drives money-market rates higher. The People’s Bank of China drained 100 billion yuan ($16 billion) in open-market operations today by issuing 28-day repurchase contracts at 4 percent, according to a statement on the website. That compares with 93 billion yuan of 14- and 28-day agreements maturing today.
“The repo sales were in line with market expectations,” said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd. “Funding needs for tax payments increased, pushing up the seven-day repo.”
The central bank said it will lower reserve-requirement ratios at county-level rural commercial lenders by two percentage points and those for county-level rural cooperatives by 0.5 percentage point from April 25, according to a statement posted on its website today. The change won’t affect liquidity levels in the banking system, the PBOC said in the statement.
The one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repo, fell two basis points to 3.78 percent. The rate climbed to 3.86 percent earlier after the reserve-requirement announcement.
The yield on government bonds due March 2024 climbed five basis points to 4.4 percent, according to prices from the National Interbank Funding Center.
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