China Money Rate Drops Most in 19 Months This Week on Inflows

China’s money-market rate had its biggest weekly decline since August 2011 as rising capital inflows boosted the supply of cash to the banking system.

Yuan positions at local lenders accumulated from sales of foreign exchange to the central bank, an indicator of cross-border inflows to China, rose a record 684 billion yuan ($110 billion) in January, official data showed March 5. The government reported today that exports climbed 21.8 percent in February from a year earlier, more than the median estimate of economists for 8.1 percent in a Bloomberg News survey.

The seven-day repurchase rate dropped 1.94 percentage points this week to 2.49 percent as of 4:30 p.m. in Shanghai, the biggest decline since the period ended Aug. 6, 2011, according to a weighted average compiled by the National Interbank Funding Center. It fell four basis points today.

“Rising capital will continue to support cash supply in the interbank market,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender.

Money-market rates decreased even after the central bank drained cash from the financial system for a third week. The People’s Bank of China withdrew a net 5 billion yuan in the five days, the same as the previous week, according to data compiled by Bloomberg.

China’s trade surplus was $15.3 billion in February, down from $29.2 billion in January, the customs bureau reported today. That compared with the median estimate of economists in a Bloomberg survey for a $6.9 billion deficit.

The one-year interest-rate swap contract, the fixed cost needed to receive the floating seven-day repo rate, dropped five basis points, or 0.05 percentage point, to 3.22 percent this week, according to data compiled by Bloomberg. The rate was unchanged today.

The yield on the 3.39 percent government bonds due August 2022 fell one basis point this week to 3.57 percent, according to the Interbank Funding Center. It rose one basis point today.

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