China Money Rate Caps Eighth Weekly Drop After Reserve-Ratio Cut

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China’s benchmark money-market rate dropped for an eighth week, the longest stretch in six years, after the central bank cut the proportion of cash lenders must set aside as reserves by the most since 2008.

The People’s Bank of China lowered the reserve-requirement ratio by one percentage point to 18.5 percent for large lenders effective April 20, a move that Australia & New Zealand Banking Group Ltd. estimated would unlock around 1.2 trillion yuan ($194 billion). China’s securities regulator approved initial public offerings by 25 companies on Thursday and said it will now review new share sales twice a month, instead of just once, according to a statement posted on its microblog.

The seven-day repurchase rate, a gauge of interbank funding availability, fell 43 basis points this week to 2.42 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It declined eight basis points Friday, and has slid 1.4 percentage point this month.

“Funding rates might have hit bottom,” Qu Qing, a Beijing-based bond analyst at Huachuang Securities Co., wrote in a research note Friday. “The market should be on alert for a rebound. With more new share sales coming, market volatility may increase.”

The central bank didn’t conduct any reverse-repurchase operations this week, resulting in a net withdrawal of 20 billion yuan due to reverse repos maturing, according to data compiled by Bloomberg.

Swaps, Bonds

The one-month Shanghai interbank offered rate fell for a 19th day, dropping seven basis points to 3.77 percent. It declined 55 basis points this week.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, declined 30 basis points this week to 2.68 percent, according to data compiled by Bloomberg. It fell two basis points on Friday.

The yield on China’s government bonds due December 2024 fell nine basis points, or 0.09 percentage point, from April 17 to 3.5 percent, National Interbank Funding Center prices show. The rate was steady on Friday.

The Ministry of Finance sold 26 billion yuan of 20-year bonds at 4.09 percent Friday, according to a statement on the website of China Central Depository & Clearing Co. That was higher than the secondary-market yield of 3.92 percent Thursday.

— With assistance by Helen Sun

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