China Money Rate Declines for Second Day as Cash Injections Seen

China’s overnight money-market rate fell after last week’s biggest gain since March on speculation the central bank will ensure there is ample cash in the system to counter sluggish economic growth.

The People’s Bank of China will auction 50 billion yuan ($8 billion) of six-month treasury deposits tomorrow on behalf of the finance ministry, which will boost lenders’ cash holdings. Maturing repurchase contracts and three-year central bank notes are set to release an additional 55 billion yuan into the banking system this week.

The overnight repurchase rate, a gauge of interbank funding availability, fell six basis points, or 0.06 percentage point, to 3.30 percent, according to a daily fixing from the National Interbank Funding Center released at 11 a.m. The rate climbed 41 basis points last week as banks set aside more funds for reserves after they increased deposits at the end of June before reporting their financial positions.

“The quarter-end impact has diminished,” said Deng Haiqing, a Beijing-based fixed-income analyst at Citic Securities Co. “We expect money rates to remain relatively low as growth momentum stays weak.”

Gross domestic product may have increased 7.4 percent in the second quarter from a year earlier, according to the median estimate in a Bloomberg survey before data due July 16. That would be the same as the first three months of the year, which was the least since 2009.

The central bank asked lenders to submit orders for 14- and 28-day repos, seven- and 14-day reverse repos, and 91-day bills, according to a trader at a primary dealer required to bid at the auctions.

The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, climbed six basis points to 3.79 percent as of 4:30 p.m. in Shanghai, according to data compiled by Bloomberg.

The yield on the government’s 4 percent bonds due June 2024 rose five basis points to 4.25 percent, according to data from the National Interbank Funding Center.

— With assistance by Helen Sun

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