China’s benchmark money-market rate fell for a fourth day, the longest declining streak in almost two months, after the biggest fund injections by the central bank since January.
The People’s Bank of China added a net 91 billion yuan ($14.6 billion) last week to meet demand before public holidays on May 1 and 2, according to data compiled by Bloomberg. The monetary authority drained 60 billion yuan today by selling 28-day repurchase agreements at 4 percent, according to a statement on its website.
“The central bank injected cash ahead of the holidays to meet demand, and now that cash flows after the holidays have weighed down rates, today’s operation is to hedge the impact,” Wei Fengchun, head of macro strategy at Shenzhen-based Bosera Asset Management Co. wrote in a note today. “There’s no change in its policy stance. It’s still trying to smooth the market.”
The seven-day repo rate, a gauge of interbank funding availability, declined three basis points, or 0.03 percentage point, to 3.11 percent as of 4:16 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate has fallen 100 basis points since April 29.
The average seven-day repo rate in May could be at a similar or slightly higher level than April, as the PBOC is likely to try and deliver relatively low and stable interbank rates to reduce financing costs and support credit growth in rural areas, economists led by Ting Lu at Bank of America Corp. in Hong Kong wrote in a research note today. The rate averaged 3.5 percent last month.
The cost of the one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repo rate, rose two basis point to 3.64 percent, data compiled by Bloomberg show. The rate dropped to 3.61 percent earlier, the lowest level since June 13.
The yield on the 4.42 percent bonds due March 2024 fell one basis point to 4.31 percent, according to data from the National Interbank Funding Center.