China Repo Rate Set for Biggest Weekly Decline This Month

China’s benchmark money-market rate headed for this month’s biggest weekly drop after the central bank injected the most funds into the financial system since June to help lenders meet quarter-end cash requirements.

The People’s Bank of China added a net 150.1 billion yuan ($25 billion) this week, the most since the week ended June 7, according to data compiled by Bloomberg. The authority rolled over 4.9 billion yuan of maturing three-year notes at 3.5 percent yesterday, according to a statement on its website. Financial markets in China will be closed Oct. 1-7 for the National Day holidays.

“The amount of injections this week calmed a market thirsty for cash at the end of the quarter,” said Guo Caomin, an analyst at Industrial Bank Co. in Shanghai. “Also, the re-issuance of the three-year notes yesterday again sends a clear signal to the market about the central bank’s intention; to continue to tighten liquidity at the long-end.”

The seven-day repurchase rate, a gauge of funding availability in the banking system, declined 31 basis points, or 0.31 percentage point, to 3.69 percent from Sept. 22, according to a weighted average compiled by the National Interbank Funding Center. The rate fell 45 basis points today.

The cost of the one-year interest-rate swap, the fixed payment to receive the floating seven-day repo rate, declined eight basis points this week to 3.98 percent, according to data compiled by Bloomberg. It decreased two basis points today.

Certificates of Deposit

The central bank said yesterday it will allow trading of certificates of deposit between banks in the “near term,” another step toward letting market forces determine interest rates.

The yield on the government’s 4.08 percent bonds due August 2023 climbed two basis points this week and today to 4.04 percent, prices from the Interbank Funding Center show.

China’s latest audit of local government debt may show the amount owed has doubled from the end of 2010, the Economic Information Daily reported, citing a person involved in the audit who wasn’t further identified. The Shanghai Stock Exchange released rules for when-issued trading in government bonds yesterday.

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