China’s benchmark money-market rate fell to the lowest level in more than a year as manufacturing data that missed estimates supported the case for further monetary easing.
A Purchasing Managers’ Index measuring factory output was 49.2 for April, preliminary readings from HSBC Holdings Plc and Markit Economics showed Thursday. That was less than the 49.6 median forecast in a Bloomberg survey and below the 50 mark dividing expansion and contraction. The People’s Bank of China didn’t offer reverse-repurchase agreements or repos in Thursday’s open-market operations for a second time this week.
The seven-day repurchase rate, a gauge of interbank funding availability, dropped four basis points to 2.57 percent, the lowest since March 2014, according to a daily fixing issued by the National Interbank Funding Center at 11 a.m. daily. It has dropped 143 basis points, or 1.43 percentage point, in April.
“Today’s flash PMI data doesn’t look good, keeping expectations for further monetary loosening intact,” said Song Qiuhong, an analyst at Shunde Rural Commercial Bank Co. in Foshan in Guangdong province. Given the slide this month, the repo rate will probably hold around the current level until the release of more economic data for April, he said.
Maturing reverse-repo contracts withdrew about 20 billion yuan ($3.2 billion) from the financial system in the five days through Thursday, the third straight week funds have flowed out, data compiled by Bloomberg show. The PBOC cut the reserve-requirement ratios for banks effective Monday, a move Australia & New Zealand Banking Group Ltd. estimated will unleash around 1.2 trillion yuan.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was steady at 2.69 percent in Shanghai, according to data compiled by Bloomberg. It dropped to 2.60 percent Wednesday, the lowest level since August 2012.
The yield on China’s government bonds due December 2024 climbed three basis point to 3.5 percent, National Interbank Funding Center prices show.
— With assistance by Helen Sun