China Conducts Record Reverse Repos Before Lunar New Year Break

China added a record 450 billion yuan ($72 billion) to the financial system using reverse-repurchase contracts today, helping banks meet increased demand for cash before the weeklong Lunar New Year break.

The People’s Bank of China offered 14-day agreements at a yield of 3.45 percent, helping push the benchmark money-market rate down for the first time in seven days. The contracts inject funds using short-term asset purchases and today’s amount was the most for a single day and exceeded each of the weekly totals for the past three months, official data show.

“The central bank is making sure that liquidity in the system is ample to entertain demand before the Chinese New Year holidays,” said Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA. “The PBOC will continue to smooth short-term money-market liquidity.”

The seven-day repurchase rate, which measures interbank funding availability, fell nine basis points, or 0.09 percentage point, to 3.38 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It climbed 77 basis points in the last six days as banks hoarded cash before the holiday, which commences Feb. 11 this year and is a period in which families exchange gifts, buy new clothes and get together for meals.

The PBOC injected a net 59 billion yuan into the financial system in the week ended Jan. 31, following four weeks of withdrawals, data compiled by Bloomberg show.

The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, was little changed at 3.16 percent, according to data compiled by Bloomberg. The rate touched a one-week low of 3.15 percent earlier.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp., Bank of China Ltd. and Agricultural Bank of China Ltd. approved new loans of about 370 billion yuan in January, China Securities Journal reported today, without citing anyone.

Before it's here, it's on the Bloomberg Terminal.