China’s Money Rate at Three-Week High on Month-End Cash Demand

China’s benchmark money-market rate climbed to the highest level in more than three weeks as cash demand increased before the month-end and holidays.

The People’s Bank of China pulled 50 billion yuan ($8 billion) from the financial system today by issuing 28-day repurchase agreements at 4 percent, according to a statement on the website. That indicates a net injection of 91 billion yuan this week, with 141 billion yuan of repo contracts maturing in the period, data compiled by Bloomberg show. Financial markets in China will be closed May 1-2 for public holidays.

“Month-end and pre-holiday cash demand is prompting the central bank to add liquidity,” said Lin Yijian, a Guangzhou-based analyst at Guangzhou Rural Commercial Bank Co. “Given the central bank’s intention to keep money rates stable, there is limited upside for the rates.”

The seven-day repo rate, a gauge of interbank funding availability, rose nine basis points, or 0.09 percentage point, to 4.11 percent as of 4:28 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That is the highest level since April 3.

While the average seven-day repo rate in May may be slightly higher than in April, it will probably stay below 4 percent as the PBOC keeps fund supply relatively ample, economists led by Ting Lu at Bank of America Corp. wrote in a note today.

Rate Swaps

The cost of the one-year interest-rate swap, the fixed payment needed to receive the floating seven-day repurchase rate, declined four basis points to 3.79 percent, data compiled by Bloomberg show.

Thirty of China’s 31 provinces and municipalities reported growth lower than their targets in the first quarter, according to data published by government websites and newspapers. China’s economy expanded 7.4 percent in the first quarter, the least since 2012, an official report showed on April 16.

The yield on the 4.42 percent government bonds due March 2024 fell one basis point to 4.32 percent, data from the National Interbank Funding Center showed.

— With assistance by Helen Sun

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