Shanghai Exchange Money Rate Jumps Most in Seven Weeks on IPOs

An interest rate for overnight loans on the Shanghai Stock Exchange jumped the most in seven weeks as investors borrowed cash to subscribe for new share sales.

Initial public offerings will lock up about 2 trillion yuan ($323 billion) this week, according to a Haitong Securities Co. report. The People’s Bank of China didn’t conduct any open-market operations in today’s auction window, according to two traders at primary dealers required to bid at the sales. Repurchase contracts were last offered on Nov. 25 and reverse-repo agreements in January 2014.

The overnight repurchase rate on the Shanghai Stock Exchange jumped 506 basis points, the most since Nov. 25, to 8.08 percent at the close in Shanghai. The rate earlier touched this year’s high of 14 percent. The seven-day repurchase rate, a gauge of interbank liquidity, rose two basis points to 3.83 percent as of 4:30 p.m., according to a weighted average from the National Interbank Funding Center.

“Today should see the IPOs’ biggest impact on exchange repo rates,” said Frank Sun, an analyst at Shanghai CFETS-ICAP International Money Broking Co. in the city. “Still, this round of IPOs didn’t bring any real shock to the interbank market, indicating liquidity in the banking system is still ample.”

Aggregate financing, the broadest measure of credit, totaled 1.69 trillion yuan in December, more than the 1.2 trillion yuan median estimate in a Bloomberg survey, central bank data showed today. New local-currency loans fell to 697.3 billion yuan from 852.7 billion yuan in November.

Swaps Gain

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose three basis points, or 0.03 percentage point, to 3.31 percent, according to data compiled by Bloomberg. It sank to a one-month low of 3.23 percent yesterday.

As long as financial data don’t worsen, the PBOC will probably remain static on the policy front, Liu Dongliang, a Shanghai-based analyst at China Merchants Bank Co. wrote in a note today. Loan growth and the expansion of shadow banking indicate businesses are getting credit, which will help to stabilize the economy, he said.

The yield on government bonds due September 2024 was unchanged at 3.54 percent, National Interbank Funding Center prices show. That’s the lowest closing level since Dec. 1.

— With assistance by Helen Sun

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