China Money Rate Drops for a Third Day as Central Bank Adds Cash

China’s benchmark money-market rate declined for a third day as the central bank pumped more cash into the financial system.

The People’s Bank of China added 32 billion yuan ($5.3 billion) today by issuing seven-day reverse-repurchase agreements at 4.1 percent, according to a statement on the website. That compared with an injection of 35 billion yuan via a similar operation on Nov. 19, part of last week’s net addition of 59 billion yuan that was the most since September. The PBOC didn’t announce the rollover of 1 billion yuan of three-year notes that matured yesterday.

The seven-day repurchase rate, a gauge of funding availability in the banking system, dropped 10 basis points, or 0.1 percentage point, to 4.76 percent as of 4:20 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

“To calm the market, we expect the PBOC to continue a net injection this week,” said Chen Long, a bond analyst at Bank of Dongguan Co., in the city of Dongguan in Guangdong province. “The PBOC understands that to achieve their reform target, they need a relatively stable environment.”

The PBOC should loosen money supply “slightly” to ease tight funding conditions as rising money-market rates will increase the debt burden for the economy, according to a front-page commentary in the China Securities Journal today, written by reporter Ren Xiao. The central bank should adopt a “mild” approach in pushing deleveraging, the official Economic Information Daily said in an editorial today.

Swaps, Bonds

PBOC Governor Zhou Xiaochuan said in a speech at a financial forum in Beijing today that market interest rates are quite stable, according to a report by Market News International. He reiterated reform targets, including accelerating interest-rate liberalization.

The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, fell five basis points to 4.48 percent, data compiled by Bloomberg show.

The yield on the 4.08 percent government bonds due August 2023 was unchanged at 4.65 percent, according to data from the Interbank Funding Center. Benchmark 10-year yields reached 4.72 percent on Nov. 20, the highest in ChinaBond data going back to September 2007.

— With assistance by Helen Sun

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