China Money Rate Gains Most in a Month on IPOs as PBOC Injects

China’s overnight money-market rate climbed the most in more than a month as planned new share sales boosted demand for funds before next week’s holidays.

Some 24 initial public offerings will lock up 2.05 trillion yuan ($328 billion) this week, according to the median estimate in a Bloomberg survey of brokerages. The week-long Chinese new year holidays start Feb. 18. The People’s Bank of China sold 55 billion yuan of 21-day reverse-repurchase agreements, which inject cash to the financial system, and 25 billion yuan of 14-day contracts Tuesday.

The overnight repurchase rate, a gauge of funding availability in the banking system, rose 14 basis points to 3.01 percent as of 4:38 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That was the biggest increase since Dec. 31 and the highest since Jan. 6.

“To some market participants, the injections yesterday didn’t meet expectations,” said Frank Sun, an analyst at Shanghai CFETS-ICAP International Money Broking Co. in the city. “Consequently, its effect in alleviating liquidity tightness is rather limited.”

Repos amounting to 35 billion yuan matured Tuesday, resulting in a net injection so far this week of 45 billion yuan. The central bank pumped 195 billion yuan into the banking system through open-market operations in the three weeks ended Feb. 6. That compared with a net addition of 450 billion yuan in the two weeks before the new year holiday last year.

PBOC Facility

PBOC branches nationwide will provide loans to smaller financial institutions in need via a standing-lending facility, expanding a trial in 10 provinces and cities started last year, according to a statement on its website Wednesday. The move is aimed at meeting pre-holiday demand for funds and ensuring stability in the money markets, the central bank said.

The PBOC cut reserve-requirement ratios for major lenders on Feb. 5 by 50 basis points to 19.5 percent. The changes will free up as much as 600 billion yuan, according to an estimate by Australia & New Zealand Banking Group Ltd.

The overnight repo rate on the Shanghai Stock Exchange tumbled 50 percentage points to 3.35 percent, after rising to 65 percent Tuesday, the highest since 2007. The seven-day contract fell 426 basis points to 9.59 percent.

Authorities must react if tumbling oil prices affect core inflation, the PBOC said in a quarterly report released Tuesday. That was a signal the central bank may loosen monetary policy further, Haitong Securities Co. analysts led by Jiang Chao in Shanghai wrote in a research note Wednesday.

Government bonds gained, pushing the 10-year yield down four basis points, or 0.04 percentage point, to 3.39 percent, according to National Interbank Funding Center prices. That’s the lowest level since the securities were sold in October.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, declined five basis points to 3.17 percent, data compiled by Bloomberg show.

— With assistance by Helen Sun

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