China Money Rate Advances on Share Sales, Month-End Cash Demand

China’s benchmark money-market rate rose the most in a month as initial public offerings and month-end demand reduced cash supply.

Lenders in China typically need to boost holdings of funds at the end of the month to meet regulatory requirements. Some 900 billion yuan ($146 billion) will be frozen at lenders due to IPO subscriptions this week, Shanghai Securities News reported Aug. 22, citing Shenyin Wanguo Securities Co. The People’s Bank of China will auction 60 billion yuan of three-month treasury deposits on behalf of the finance ministry tomorrow, which will inject cash into the banking system.

The seven-day repo rate, a gauge of funding availability between banks, rose 23 basis points to 3.59 percent as of 4:36 p.m. in Shanghai, according to a weighted average by the National Interbank Funding Center. That was the biggest increase since July 23.

“Funding in seven or 14 days has become a bit tight due to the IPOs,” fixed-income analysts at Guotai Junan Securities Co. led by Shanghai-based Xu Hanfei, wrote in a research note today. “Tomorrow’s treasury deposit auction should help to stabilize the market.”

One-year interest rate swaps, the fixed payment to receive the floating seven-day repurchase rate, fell two basis points, or 0.02 percentage point, to 3.59 percent, data compiled by Bloomberg show.

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

Some Chinese banks may have become reluctant to lend money due to rising non-performing loans, adding further pressure to the economy amid uncertain growth prospects, Shanghai Securities News reported today, citing unidentified persons from banks.

The yield on the 4 percent government bonds due June 2024 declined three basis points to 4.24 percent, according to data from the National Interbank Funding Center.

— With assistance by Helen Sun

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