China Money Rate Caps Biggest Weekly Gain in Five Months on IPOs

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China’s money-market rate capped the biggest weekly gain in more than five months as funding demand increased amid a slew of initial public offerings.

New share sales by 25 companies scheduled for next week will lock up 6.7 trillion yuan ($1.1 trillion), according to the median estimate of six analysts surveyed by Bloomberg. While at least seven regional governments will sell bonds from June 15 to 19, lenders have to park company tax payments at the central bank this month, draining money from the financial system.

The 14-day repurchase rate, a gauge of interbank funding availability, climbed 34 basis points this week and 13 basis points Friday to 2.70 percent in Shanghai, a weighted average from National Interbank Funding Center shows. That’s the biggest five-day increase since Dec. 19.

“It’s hard to be optimistic about liquidity, given the IPOs coming up,” said Xu Hanfei, a Shanghai-based analyst at Guotai Junan Securities Co. “This, along with tax payments, local government bond supplies and quarter-end funding demand, will drive money rates higher.”

The People’s Bank of China will auction 50 billion yuan each of three- and six-month treasury deposits on June 16, according to a Finance Ministry statement Thursday. The central bank could cut reserve-requirement ratios for banks as early as this weekend, said Liu Dongliang, an analyst at China Merchants Bank Co. The PBOC halted open-market operations for an eighth consecutive week.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, gained five basis points this week to 2.42 percent, data compiled by Bloomberg show. It fell one basis point Friday.

The yield on sovereign bonds due 2025 rose four basis points from a week ago to 3.62 percent, according to National Interbank Funding Center prices. It declined two basis points Friday.

(An earlier version of this report was corrected to amend the direction of the move in the headline)

— With assistance by Helen Sun

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