China Overnight Rate Drops Most in a Month as Cash Seen Rising

China’s overnight money-market rate slumped the most in a month on speculation cash supply will rise after banks met quarter-end capital requirements.

The Purchasing Managers’ Index was 50.9 in March, an 11-month high, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing. The People’s Bank of China drained 57 billion yuan ($9.2 billion) from the financial system last week, a sixth weekly withdrawal, according to data compiled by Bloomberg.

“Liquidity will become loose since the quarter-end impact is over,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation’s sixth-biggest lender. “The PBOC’s capital draining isn’t big enough to raise fund costs.”

The one-day repurchase rate, which measures interbank funding availability, dropped 71 basis points to 2 percent as of 4:30 p.m. in Shanghai, the biggest drop since March 4, according to a weighted average rate compiled by the National Interbank Funding Center.

The central bank gauged demand today for sales of 28-day repurchase contracts and seven-day reverse repo agreements this week, according to a trader at a primary dealer required to bid at the auctions.

The one-year swap rate, the fixed cost needed to receive the floating seven-day repurchase rate, was unchanged at 3.28 percent, according to data compiled by Bloomberg.

The yield on the 3.52 percent government bonds due February 2023 dropped three basis points, or 0.03 percentage point, to 3.52 percent, according to the Interbank Funding Center.

— With assistance by Judy Chen

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