China’s benchmark money-market rate fell to a two-week low on speculation there is enough cash in the system for the central bank to pull funds for a second week.
The People’s Bank of China sold 30 billion yuan ($4.9 billion) of 14-day repurchase agreements today at 3.7 percent, according to a statement on its website. There are 30 billion yuan of repo contracts that will mature and inject liquidity into the banking system this week. If the monetary authority sells more of the agreements in its open-market operations on Aug. 7 that will result in a net drainage of funds.
“It looks like the PBOC will have another net withdrawal this week, which means it believes there’s enough liquidity in the banking system,” said Chen Peng, a fixed-income analyst at Fortune Securities Co. in Shenzhen. “Its focus will continue to be on lowering funding costs for some sectors by targeted easing measures, rather than to flood the market with money.”
The seven-day repurchase rate, a gauge of interbank funding availability, fell 15 basis points, or 0.15 percentage point, to 3.66 percent as of 4:36 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. It touched 3.63 percent earlier, the lowest since July 22.
The PBOC drained a net 11 billion yuan in open-market operations in the five days through July 31, the first weekly withdrawal since the beginning of May.
The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, was steady at 3.77 percent, according to data compiled by Bloomberg.
China’s services Purchasing Managers’ Index was 50 in July, according to figures released by HSBC Holdings Plc and Markit Economics today. That compared with 53.1 in June and is the lowest since the series began in 2011.
The yield on the government’s 4 percent bonds due June 2024 fell one basis point to 4.26 percent, according to data from the National Interbank Funding Center.