China Money Rate Declines to 11-Month Low as Reverse-Repo Cut

Updated on

China’s overnight money-market rate fell to an 11-month low as the central bank cut borrowing costs for reverse-repurchase operations for a second straight week.

The People’s Bank of China sold 10 billion yuan ($1.6 billion) of seven-day reverse repos that add funds to the system at 3.35 percent, according to a statement on its website. That was 10 basis points less than the two auctions last week, and the fifth time the monetary authority has lowered the rate since the beginning of March.

“The central bank obviously wants to stabilize liquidity expectations,” said Huang Hai, the Beijing-based deputy head of the research department at SDIC CGOG Futures Co., a unit of State Development & Investment Corp. “Interbank money rates will probably remain low.”

The overnight repo rate, a gauge of interbank funding availability, fell two basis points to 2.33 percent in Shanghai, a weighted average compiled by the National Interbank Funding Center shows. It earlier dropped to 2.3 percent, the lowest since May. The seven-day repo rate was steady at 2.90 percent, after declining to an 11-month low of 2.81 percent.

The PBOC has cut the reverse-repo rate by 50 basis points since early February. It drained a net 15 billion yuan from the financial system last week, after adding the same amount in open-market operations over the previous two weeks. There are 35 billion yuan of reverse-repo contracts maturing this week that will drain cash from the interbank market, according to data compiled by Bloomberg.

Exchange Repo

The interest rate for overnight loans on the Shanghai Stock Exchange closed 35 basis points lower at 0.16 percent, after surging to 9 percent. Investors will place 2.73 trillion yuan of orders for 30 companies’ initial public offerings, a Bloomberg survey of six brokerages shows.

New local-currency loans and aggregate financing were at 1.18 trillion yuan last month, data from the central bank showed Tuesday. That compared with median estimates of 1.04 trillion yuan and 1.5 trillion yuan, respectively.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, dropped four basis points to 3.07 percent, according to data compiled by Bloomberg. The yield on the December 2024 government bonds fell two basis points to 3.65 percent, prices from the National Interbank Funding Center show.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal. LEARN MORE