PBOC Switch to Drain Cash Turns Citigroup Bearish

The People’s Bank of China’s first draining of cash since June, seeking to damp a property-market revival, is prompting Citigroup Inc. to predict one-year yields will rise faster than longer-term rates.

The central bank sold repurchase agreements for the first time in eight months on Feb. 19, withdrawing capital from banks after they lent the most money in two years in January. The gap between one- and 10-year government yields has widened 26 basis points in the past four months to 86, after touching 88 on Feb. 19, the highest level since August 16, according to Chinabond. Comparable spreads across the so-called yield curve are 172 basis points in Brazil, 154 in Russia and one in India.