China Money Rate Rises Most in Eight Weeks on Quarter-End

China’s benchmark money-market climbed the most in eight weeks on speculation banks are hoarding cash before the quarter-end and a week-long holiday.

The People’s Bank of China asked lenders to submit orders for seven- and 14-day reverse-repurchase agreements, 28-day repurchase contracts and 91-day bills today, according to a trader at a primary dealer required to bid at the auctions. The monetary authority has drained funds from the financial system for three consecutive weeks. Markets in China will close Oct. 1-7 for the National Day holidays.

The seven-day repo rate, a gauge of funding availability in the banking system, rose 39 basis points, or 0.39 percentage point, to 4.4 percent as of 3:52 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest increase since July 29 and the highest level in almost a month. The rate surged to a record 12.45 percent on June 20.

“It is expected the money market can tighten a bit on quarter-end cash demand, especially before a long holiday,” said Chen Ying, an analyst at GF Futures Co. in Guangzhou. “However, I don’t expect anything similar to the June crunch now that the banks have learned from the experience.”

The cost of one-year interest rate swaps, the fixed payment to receive the floating seven-day repo rate, gained five basis points to a one-week high at 4.1 percent.

Preliminary Audit

The preliminary reading for a September Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics was 51.2. That compares with the median estimate of 50.9 in a Bloomberg survey and a final reading of 50.1 in August.

China’s economy may expand 7.5 percent in the second half, the People’s Daily reported today, citing Zhu Baoliang, head of the State Information Center’s economic forecasting department in Beijing. Gross domestic product increased 7.7 percent in 2012, official data show.

The yield on the government’s 4.08 percent bonds due August 2023 climbed three basis points to 4.05 percent, according to prices from the Interbank Funding Center.

China has completed a preliminary audit of local government debt, 21st Century Business Herald reported, citing unidentified people that participated in the audit.

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