China Money Rate Declines Most in Two Weeks as IPO Funds Return

China’s benchmark money-market rate fell the most in two weeks as funds locked up for new share sales returned to the banking system.

Around 3 trillion yuan ($479 billion) was set aside for 23 initial public offerings last week, according to the median estimate of 12 brokerages surveyed by Bloomberg News. Demand for funds drove the overnight interest rate on the Shanghai Stock Exchange to a one-month high of 36 percent on March 12.

The seven-day repurchase rate, a gauge of interbank funding availability, dropped nine basis points, or 0.09 percentage point, to 4.62 percent as of 4:32 p.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. That was the biggest decline since March 2. The rate moved between 4.56 percent and 4.75 percent last week.

“Considering the huge amount of new share sales, liquidity was largely stable last week,” Chen Kang, a Shanghai-based analyst at SWS Research Ltd., wrote in a research note today. “Money rates will face challenges again as quarter-end regulatory checks and tax payments next month will drive up demand for funds.”

Policy makers will use targeted measures if China’s growth falls below the lower limit of a reasonable range and cuts into employment or wages, Premier Li Keqiang said at a press conference in Beijing on Sunday. The comments followed better-than-expected credit data released last week. The government has set this year’s expansion target at 7 percent, the lowest goal in more than 15 years.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, climbed for a third day, jumping 14 basis points to 3.76 percent, data compiled by Bloomberg show. The rate touched 3.78 percent earlier, the highest level since Aug. 5.

The yield on China’s sovereign bonds due September 2024 rose three basis points to 3.55 percent, the highest level since Jan. 13, National Interbank Funding Center prices show.

“A lack of data in the next two weeks, plus Premier Li’s comments over the weekend maybe means there will be no major policy loosening in the very short term,” said Wang Qiangsong, an analyst at Bank of Nanjing Co. in the city.

— With assistance by Helen Sun

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