Shanghai Exchange Loan Rate Climbs for Second Day on Share Sales

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The interest rate for overnight loans on the Shanghai Stock Exchange gained for a second day as initial public offerings boosted demand for funds.

Investors may place 2.73 trillion yuan ($441 billion) of orders for share sales by 30 Chinese companies this week, a Bloomberg survey of six brokerages shows. Lenders are also starting to park companies’ tax payments for the first quarter at the central bank, reducing cash supply. The People’s Bank of China sold 10 billion yuan of seven-day reverse-repurchase agreements that add funds at 3.35 percent on Thursday, according to a statement on its website.

“The new share subscriptions sent some ripples to the market,” said Frank Sun, an analyst at Shanghai CFETS-ICAP International Money Broking Co. in the city. “In the meantime, quarterly tax payments in the next few days are likely to add further pressure to the market.”

The overnight repurchase rate traded on the Shanghai exchange closed 66 basis points higher at 3.11 percent, according to data compiled by Bloomberg. It has jumped 256 basis points this week and touched a one-month high of 9 percent on Tuesday. The overnight repo rate on the interbank market was steady at 2.27 percent, after reaching an 11-month low of 2.25 percent earlier.

The central bank also cut the interest rate it pays on the reverse-repo agreements by 10 basis points on April 14. It drained a net 15 billion yuan from the financial system this week, the same amount as the previous period, according to data compiled by Bloomberg.

Swaps Gain

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose two basis points, or 0.02 percentage point, to 3.01 percent, according to data compiled by Bloomberg. It touched a four-month low of 2.97 percent earlier.

If there is no further aggressive easing by the PBOC in the next couple of weeks, further downside to the swaps is limited, said Frances Cheung, the head of Asia ex-Japan rates strategy at Societe Generale SA in Hong Kong.

Government bonds were little changed, with the yield on the notes due December 2024 at 3.59 percent, National Interbank Funding Center prices show.

— With assistance by Helen Sun

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