China Repo Snaps Three-Day Advance as PBOC Bolsters Cash Supply
China’s money-market rate fell, snapping a three-day advance, as the central bank injected funds into the financial system to meet month-end cash demand.
The People’s Bank of China offered 29 billion yuan ($4.7 billion) of seven-day reverse-repurchase agreements at a yield of 3.35 percent, according to a trader at a primary dealer required to bid at the auctions. The monetary authority also sold 50 billion yuan of 14-day reverse repos at 3.45 percent, the trader said.
“The money market rates will come down as liquidity is still loose and will remain so,” said Chen Qi, a strategist at UBS Securities Co. in Shanghai. “However, investors should be wary that the rates could be volatile as we approach year-end.”
The seven-day repurchase rate, a gauge of interbank funding availability, fell two basis points, or 0.02 percentage point, to 3.34 percent as of 10:02 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 2.3 percent Nov. 19, the lowest since June 8.
The world economy is in its best shape in 18 months as China’s prospects improve and the U.S. looks likely to avoid the so-called fiscal cliff of automatic spending cuts and tax increases, according to the latest Bloomberg Global Poll of investors. Two-thirds of the 862 surveyed described the global economy as either stable or improving. That’s up from just over half who said that in September and is the most since May 2011.
The yield on 3.26 percent government bonds due June 2014 rose two basis points to 2.92 percent, according to data from the Interbank Funding Center. The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, shed three basis points to 3.37 percent, according to data compiled by Bloomberg.
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