China Repo Touches Three-Week Low as Cash Returns After Holiday

China’s money-market rate touched the lowest level in almost three weeks as cash returned to the financial system after the New Year holidays.

The People’s Bank of China gauged demand today for a sale of seven- and 14-day reverse-repurchase contracts tomorrow, according to a trader at a primary dealer required to bid at the auctions. The monetary authority offered five-day reverse repos on Jan. 5 at a yield of 3.3 percent. Markets were closed for three days from Jan. 1.

“After the New Year, liquidity has come back,” said Weisheng He, a Shanghai-based strategist at Citigroup Inc. “The PBOC will come to the rescue” whenever there’s a lack of funds, he said.

The seven-day repurchase rate, a gauge of interbank funding availability in the banking system, decreased 11 basis points to 2.99 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It dropped as much as 30 basis points, or 0.30 percentage point, earlier to 2.80 percent, the lowest since Dec. 20.

China’s economic growth is likely to exceed 8 percent this year, with inflation becoming a potential concern in the second half, Chen Yulu, president of Renmin University of China and a central bank academic adviser, said this week in Beijing.

Chen’s forecast compares with the median estimate of economists in a Bloomberg survey for 8.1 percent growth in 2013 and 7.7 percent last year, which would mark the slowest pace since 1999. New yuan lending above 9 trillion yuan ($1.4 trillion) for this year will be “enough to support” that level of growth, Chen said.

The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, was little changed at 3.35 percent in Shanghai, according to data compiled by Bloomberg.

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