China Money Rate Completes Biggest Weekly Jump Since June

China’s money-market rate completed the biggest weekly jump since a cash squeeze in June after the central bank refrained from injecting funds through open-market operations.

The People’s Bank of China suspended selling reverse-repurchase contracts Oct. 17, 22, and 24, after offering seven-or 14-day agreements at twice-weekly auctions for more than three months. The PBOC withdrew a net 58 billion yuan ($9.5 billion) this week, the most since February, after draining a net 44.5 billion yuan in the week ended Oct. 18., according to data compiled by Bloomberg.

The seven-day repurchase rate increased 157 basis points, or 1.57 percentage point, this week to 5.06 percent as of 4:23 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest weekly advance since the period ended June 23. The rate climbed 27 basis points today. The overnight repo rate rose 157 basis points this week to 4.55 percent.

“The central bank suspended reverse-repo sales probably in order to offset the impact of fund inflows and rising inflation pressure,” said Gao Hui, an analyst at Founder Securities Co. in Beijing. “So far we don’t see any factors that will lead to a repeat of the June crunch.”

Yuan positions at Chinese financial institutions accumulated from foreign-exchange purchases climbed 0.5 percent last month, the most since April, to 27.5 trillion yuan. Consumer prices rose 3.1 percent from a year ago in September, the fastest pace since February.

Rate Swap

The one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repo, rose 11 basis points this week to 4.08 percent, according to data compiled by Bloomberg. That was the biggest weekly advance since August. The cost fell five basis points today.

The yield on government bonds due August 2023 rose 10 basis points this week to 4.23 percent, according to data from the Interbank Funding Center. It climbed two basis points today.

Export-Import Bank of China postponed two bond sales of a combined 10 billion yuan scheduled on Oct. 28 to Oct. 31 because of market turbulence, said an official at the bank’s treasury department, who asked not to be identified because of the bank’s rules.

The National Interbank Funding Center started to publish a Loan Prime Rate today, marking another step toward market-based interest rates. The one-year rate is 5.71 percent today, compared with the PBOC-set benchmark of 6 percent.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal.