China Money Rate in Longest Slide in Six Months on Yuan OutlookBloomberg News
China’s benchmark money-market rate fell for a seventh day, the longest run of declines in six months, on speculation a more stable yuan will stem capital outflows.
People’s Bank of China Governor Zhou Xiaochuan said Sunday the central bank will roll out a series of policies this year to increase capital-account convertibility. The yuan rallied against the dollar last week and gained offshore in Hong Kong by the most since trading started in 2010. The rebound suggests the currency’s drop since the fourth quarter has probably come to an end, Li Miaoxian, an analyst at Bocom International Holdings Co., wrote in a research note.
The seven-day repurchase rate, a gauge of interbank funding availability, dropped 18 basis points to 4.03 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate retreated 50 basis points last week.
“We’ve noticed a change of expectation on the yuan in the last couple of weeks, which means the domestic liquidity outlook may not be as bad as previously expected,” said Zuo Junyi, a Beijing-based fixed-income analyst at Founder Securities Co. “China is still in an easing cycle. That, along with the possibility of the yuan appreciating in the second quarter, may be affecting sentiment in the interbank market.”
The People’s Bank of China lowered the interest rate it paid on reverse-repurchase agreements last week and drained the least amount of funds from the banking system in open-market operations since the Lunar New Year holidays that ended Feb. 24.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose three basis points to 3.44 percent, after tumbling 22 basis points in the five days through March 20, data compiled by Bloomberg show.
The yield on China’s sovereign bonds due September 2024 climbed three basis points, or 0.03 percentage point, to 3.52 percent, prices from the National Interbank Funding Center show.
— With assistance by Helen Sun