China Money Rate Declines Amid Speculation PBOC Will Inject Cash

China’s benchmark money-market rate declined for a second day amid speculation the central bank will add cash to the financial system as new share sales boost demand for funds.

About 900 billion yuan ($146 billion) will be frozen at lenders due to subscriptions for initial public offerings this week, Shanghai Securities News reported Aug. 22, citing estimates by Shenyin Wanguo Securities Co. The People’s Bank of China added a net 25 billion yuan in the last two weeks via open-market operations, and there are 65 billion yuan of repurchase contracts maturing this week, data compiled by Bloomberg show.

“The central bank will act to make sure there is enough liquidity at the end of the month to avoid any shocks to the banking system,” said Deng Haiqing, a Beijing-based fixed-income analyst at Citic Securities Co. “Any rate spikes due to IPOs should be temporary.”

The seven-day repurchase rate, a gauge of funding availability between banks, fell four basis points, or 0.04 percentage point, to 3.36 percent as of 4:30 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. It fell as much as 11 basis points earlier to 3.29 percent.

One-year interest rate swaps, the fixed payment to receive the floating seven-day repurchase rate, dropped one basis point to 3.68 percent, data compiled by Bloomberg show.

Bank Loans

The nation’s four biggest banks made new loans of about 56 billion yuan in the first 17 days of August, Caixin reported Aug. 22, without citing anyone. China International Capital Corp. the same day estimated the total at 31.9 billion yuan for the first two weeks of August and forecast total new loans for the month of 600 billion to 700 billion yuan. July’s tally of 385.2 billion yuan was the lowest since 2009.

China needs to involve private capital more heavily in funding railway investment, according to a statement posted on the central government’s website yesterday, citing Premier Li Keqiang’s talk during a visit to China Railway Corp. on Aug. 22. Investment plays an important role in stabilizing economic growth, he said.

The yield on the 4 percent government bonds due June 2024 declined one basis point to 4.27 percent, according to data from the National Interbank Funding Center.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE