China Money Rate Drops Most in Two Weeks as Cash Flows to Banks

China’s benchmark money-market rate declined by the most in almost two weeks as cash returned to the financial system with the end of the holiday season.

The seven-day repurchase rate, a gauge of funding availability in the banking system, fell 50 basis points to 4.33 percent as of 4:38 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That’s the biggest drop since Dec. 23. It declined 13 basis points yesterday as the interbank market reopened after a three-day holiday.

Demand for funding due to year-end regulatory checks and pre-holiday cash hoarding drove the rate to a one-week high of 4.96 percent on Dec. 31. The People’s Bank of China today asked lenders to submit orders for 14- and 28-day repurchase agreements, seven- and 14-day reverse repos, and 91-day bills as usual, according to a trader at a primary dealer required to bid at the auctions.

“Pre-festival reserves and deposit hoarding tightened the market before the holiday,” said Deng Haiqing, a Beijing-based analyst at Citic Securities Co. “This week, without any factors that would affect liquidity, we expect the tightness will alleviate.”

An official manufacturing Purchasing Managers’ Index slipped to 50.1 in December from 50.3 in November, according to official data released Jan. 1. That was the lowest level in 18 months, and compared with a median estimate of 50 in a Bloomberg survey of analysts. A separate gauge compiled by HSBC Holdings Plc and Markit Economics was 49.6, showed figures released Dec. 31. That’s below the 50 mark, which divides expansion and contraction.

Swaps Drop

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, fell one basis point, or 0.01 percentage point, to 3.42 percent, according to data compiled by Bloomberg.

Government bonds gained, with the yield on the notes due September 2024 declining three basis points to 3.64 percent, prices from the National Interbank Funding Center show. The benchmark 10-year sovereign yield slid 93 basis points in 2013, the biggest annual drop since 2008, ChinaBond data show.

Economic growth may be about 7 percent this year, according to a State Information Center report in the China Securities Journal today.

— With assistance by Helen Sun

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