China Money-Market Rate Jumps as Central Bank Drains Excess Cash

China’s money-market rate jumped the most in six weeks, rebounding from a nine-month low, as the central bank withdrew excess cash from the financial system.

The People’s Bank of China sold 50 billion yuan ($8.1 billion) of 28-day repurchase agreements at 4 percent and 35 billion yuan of 14-day contracts at 3.8 percent, it said in a statement today. That’s the first use of the 28-day instrument since June and comes after 268 billion yuan of 14-day repos were sold in the last two weeks. Banks are awash with cash after the central bank sold the yuan to weaken the currency against the dollar last month.

“Today’s repo sale, especially the 28-day contract, suggests the central bank sees the current market liquidity” as being excessive, said Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd. in Shanghai. The volume of repos being sold compares with 48 billion yuan of funds maturing today, he said.

The seven-day repurchase rate, a gauge of funding availability, increased 75 basis points, or 0.75 percentage point, to 3.53 percent, according to a fixing published by the National Interbank Funding Center. That’s the biggest increase since Jan. 20. The rate fell to 2.78 percent yesterday, the lowest since May 15.

One-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, rose eight basis points to 4.48 percent as of 4:34 p.m. in Shanghai, data compiled by Bloomberg show, paring this year’s decline to 74 basis points.

Ten-year government bonds fell for a third day, with the yield on the 4.08 percent securities due August 2023 rising four basis points to 4.5 percent, data from the National Interbank Funding Center show.

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