China’s benchmark money-market rate posted its biggest weekly decline since May after the central bank lowered borrowing costs and added cash to the financial system.
The People’s Bank of China cut benchmark interest rates over the weekend for the fourth time since November and relaxed reserve-requirement ratios for some lenders, a move Haitong Securities Co. said could provide about 400 billion yuan ($64.5 billion) of funds. The move came as stocks plunged and local government bond sales drained liquidity. The PBOC injected a net 50 billion yuan through open-market operations this week.
“There’s still room for further easing and cash injections,” said Daniel Chan, a Hong Kong-based analyst at Bright and Brilliant Investment Consultancy Ltd. “The stock rout could even accelerate the pace of PBOC easing as it’s obviously a big concern to the authorities.”
The seven-day repurchase rate, a gauge of interbank funding availability, dropped 10 basis points from June 26 to 2.83 percent as of 4:01 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the most since the period ended May 15. The rate rose eight basis points on Friday.
Subscriptions for 28 initial public offerings are estimated to lock up 4.03 trillion yuan of funds from Friday through next week, according to a Bloomberg survey. Short-term rates are unlikely to fall further as share sales absorb money, according to Huachuang Securities Co.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, fell four basis points this week and two basis points on Friday to 2.47 percent, data compiled by Bloomberg show. The yield on the government bonds due April 2025 fell three basis points from June 26 to 3.59 percent, National Interbank Funding Center prices show. It fell four basis points on Friday.
China’s services Purchasing Managers’ Index fell to a five-month low in June, a private gauge showed Friday. Policy makers are boosting the money supply and driving down borrowing costs in a bid to revive an economy expanding at the slowest pace since 1990.