China Money Rates Drop to One-Week Lows as PBOC Injects Funds

China’s money-market rates fell to the lowest levels in a week as the central bank added funds to the financial system by conducting 14-day reverse-repurchase contracts for the first time this month.

The People’s Bank of China injected 33 billion yuan ($5.4 billion) via the agreements at a 4.1 percent yield today, according to a statement on its website. The contracts were last used to add 16 billion yuan at 4.3 percent on Oct. 31. The monetary authority auctioned 35 billion yuan of seven-day reverse repos at 4.1 percent on Nov. 19 and its money-market operations supplied a net 9 billion yuan to the financial system this week.

The overnight repurchase rate, a gauge of funding availability in the banking system, fell nine basis points, or 0.09 percentage point, to 4.04 percent, according to a daily fixing by the National Interbank Funding Center. That was the lowest since Nov. 13. The seven-day repo rate declined three basis points to 4.74 percent.

“The PBOC resumed the 14-day reverse-repo sales to prevent rates from rising too much and too fast, so that it can continue to realize the goal of maintaining a neutral-to-tight policy stance,” said Zuo Junyi, an analyst at Founder Securities Co. in Beijing. “I don’t see that will change before the first quarter next year.”

The overnight and seven-day repo rates touched this month’s highs on Nov. 18 of 4.55 percent and 5.40 percent, respectively, after the Communist Party pledged to accelerate reforms that will allow the market a greater role in setting interest rates.

The one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repo rate, rose two basis points to 4.58 percent as of 4:43 p.m. in Shanghai, according to data compiled by Bloomberg.

Bond Auction

The yield on the 4.08 percent government bonds due August 2023 jumped 10 basis points to 4.70 percent, according to data from the Interbank Funding Center.

The Ministry of Finance auctioned 28.15 billion yuan of 10-year bonds yesterday at a yield of 4.71 percent, according to a statement on China Central Depository & Clearing Co.’s website. That compared with a yield of 4.14 percent at the last sale of notes of that tenor on Oct. 23.

A gauge of manufacturing in China dropped for the first time in four months. The preliminary reading of a Purchasing Managers’ Index for November fell to 50.4 from a final reading of 50.9 in October, according to a report today from HSBC Holdings Plc and Markit Economics. Readings above 50 signal expansion.

— With assistance by Helen Sun

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