China’s overnight market-money rate climbed to the highest level in three weeks on speculation demand for cash will increase as growth in new loans accelerated.
Lending rose 42 percent to 1.28 trillion yuan ($206 billion) in June, the biggest advance since January, government figures show, spurring optimism the economy is picking up after data last week showed aggregate financing climbed to the highest level in five months.
The one-day repurchase rate, a gauge of interbank funding availability, rose for a 13th consecutive day, adding one basis point to 1.27 percent as of 4:30 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center.
“As demand in the real economy recovers and banks become more willing to lend, credit growth is expected to continue to expand,” said Frank Sun, an analyst at Shanghai CFETS-ICAP International Money Broking Co. in the city. “It’ll be difficult for liquidity in the banking system to return to the level of two months earlier, although we expect overall liquidity to remain ample.”
The People’s Bank of China drained a net 45 billion yuan from the financial system last week, the first withdrawal since April. The central bank will probably continue to pare injections or halt them altogether, according to Minsheng Securities Co. and Fortune Securities Co.
The seven-day repo rate gained rose basis point to 2.41 percent, narrowing the difference with the overnight rate to a one-month low of 113 basis points.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, dropped three basis points to 2.46 percent, according to data compiled by Bloomberg. It fell two basis points on Friday. The yield on sovereign bonds due April 2025 declined two basis points to 3.51 percent, National Interbank Funding Center prices show.
— With assistance by Helen Sun