China Money Rate Gains to Three-Week High Before Holidays

China’s benchmark money-market rate climbed to a three-week high as demand for cash increased ahead of local holidays.

The People’s Bank of China drained funds from the financial system for a third week, withdrawing net 8 billion yuan ($1.3 billion) in three days through today, data compiled by Bloomberg show. Chinese markets will be shut Sept. 19-20 for the mid-Autumn festival and from Oct. 1-7 for the National Day holidays.

The seven-day repurchase rate, a gauge of funding availability in the banking system, rose 17 basis points, or 0.17 percentage point, to 3.83 percent as of 4:35 p.m. in Shanghai, the highest since Aug. 29, according to a weighted average compiled by the National Interbank Funding Center.

“We’ll probably see the money market remain in a tight balance,” said Li Yiming, an analyst at Citic Securities Co. in Beijing. “After the June experience, banks know how to increase reserves to prepare for quarter-end cash demand.”

China’s interbank market witnessed the worst cash crunch in at least a decade in June, with key money-market rates surging to records as commercial lenders tried to find money to meet quarter-end requirements set by the PBOC.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose two basis points to 4.05 percent, according to data compiled by Bloomberg.

Yuan position at Chinese banks accumulated from sales of foreign exchange to the central bank climbed 27.3 billion yuan in August from a month earlier to 27.4 trillion yuan as of the end of last month, according to the central bank data today.

The yield on the 4.08 percent sovereign debt due August 2023 declined one basis point to 4.08 percent, according to prices from the Interbank Funding Center.

— With assistance by Helen Sun

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