China Money Rate Declines as Cash Returns to Banks After IPOs

China’s benchmark money-market rate fell for a third day, the longest run of declines in almost two months, as funds return to banks after being locked up for initial public offerings of shares.

Five Chinese companies started to market IPOs on July 23, freezing 415.5 billion yuan ($67 billion) in bids, Shanghai Securities News reported last week. The People’s Bank of China has, since July, lent 500 million yuan to 1 billion yuan each to banks in Shanghai, Haikou, Changsha and Inner Mongolia for relending, 21st Century Business Herald reported on July 25, citing people it didn’t identify.

The seven-day repurchase rate, a gauge of interbank funding availability, dropped nine basis points, or 0.09 percentage point, to 4.03 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It rose 36 basis points last week.

“The funds for IPOs will be released today and tomorrow,” said Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd. in Shanghai, predicting the seven-day repo will fall below 3.8 percent this week. “The news of relending will also help stabilize the market.”

The monetary authority gauged demand for 14- and 28-day repurchase contracts this week, according to a trader at a primary dealer required to bid at the auctions. It also asked banks to submit orders for seven- and 14-day reverse repo agreements and 91-day bills this morning, the trader said.

China’s economic growth won’t show “strong” momentum in 2015 and 2016 because of weak fixed-asset investment growth, according to a commentary published by Xinhua News Agency. This year’s development targets may be difficult to achieve, the article said.

The cost of one-year interest-rate swaps, the fixed payment needed to receive the floating seven-day repo rate, rose six basis points to 3.86 percent in Shanghai, data compiled by Bloomberg show. The yield on the 4 percent government bonds due June 2024 fell one basis point to 4.30 percent, the lowest since July 14, according to the National Interbank Funding Center.

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