China Money Rate Climbs to Seven-Week High on Quarter-End Demand

China’s benchmark money-market rate rose to a seven-week high as new share sales drained funds and banks hoarded cash to meet quarter-end requirements.

Initial public offerings, which resumed last week after a four-month gap, locked up an estimated 500 billion yuan ($80 billion) at Chinese lenders today, according to Shenyin Wanguo Securities Co. Local banks need to raise deposits to meet requirements set by regulators at the end of every quarter and such borrowings helped push the seven-day repurchase rate to a record 10.77 percent a year ago.

“Quarter-end funding needs are driving up money rates,” said Yan Yan, a Shanghai-based fixed-income analyst at China Guangfa Bank Co. “However, as the impact of IPOs on liquidity alleviates this week, further upside will be limited.”

The seven-day repo rate, a gauge of interbank funding availability, rose six basis points, or 0.06 percentage point, to 3.48 percent, the highest level since May 4, according to a daily fixing from the National Interbank Funding Center. The rate jumped 24 basis points on June 20, the most since May 20.

HSBC Holdings Plc and Markit Economics’ preliminary Purchasing Managers’ Index for manufacturing industries in China was 50.8, more than the median estimate of 49.7 in a Bloomberg survey and the first time this year it has been above 50, the dividing line between expansion and contraction. The central bank cut reserve ratios for some lenders this quarter, while the government outlined a package of spending on railways and shantytown redevelopment, as well as expanding tax relief for micro-enterprises and exporters.

Rate Swaps

The cost of one-year swaps, the fixed payment needed to receive the floating seven-day repo rate, climbed two basis points to 3.48 percent as of 4:30 p.m. in Shanghai, data compiled by Bloomberg show. The rate climbed as high as 3.49 percent after the factory-output report was released, and has fallen 81 basis points this quarter.

The People’s Bank of China asked lenders to submit orders for 14- and 28-day repurchase agreements, seven- and 14-day reverse repos, and 91-day bills for this week, according to a trader at a primary dealer required to bid at the auctions.

The yield on the 4.42 percent government bonds due March 2024 fell two basis points to 4.05 percent, National Interbank Funding Center prices show.

— With assistance by Helen Sun

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