China’s Money Rate in Longest Slide in 13 Months on PBOC Easing

China’s benchmark money-market rate fell for a ninth day, the longest losing streak since February 2014, after the central bank added to its measures to bring down funding costs.

The People’s Bank of China cut the interest rate it pays on reverse-repurchase agreements for a third time this month on Tuesday. It first lowered the yield on March 3, two days after reducing benchmark interest rates for the second time in three months to bolster the economy, and then again on March 17. Manufacturing in China slowed to an 11-month low, according to the preliminary reading of a private Purchasing Managers’ Index.

The seven-day repurchase rate, a gauge of interbank funding availability, dropped nine basis points to 3.87 percent as of 4:21 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It fell to 3.80 percent earlier, the lowest since Jan. 27.

“Last week’s rate cut seemed to wake up the interbank market and short-term rates,” Tim Condon, head of Asia research at ING Groep NV in Singapore, wrote in a research note Wednesday. “The policy rate cuts should be transmitted basis point for basis point to money-market rates, which would make the new upper bound for the seven-day repo rate 3.50 percent.”

The central bank sold 20 billion yuan ($3.2 billion) of seven-day reverse repos at 3.55 percent Tuesday, compared with a yield of 3.65 percent at the auctions last week. The PBOC this month rolled over 350 billion yuan of loans extended to banks via its medium-term lending facility in December, according to a person with knowledge of the matter who asked not to be identified because the information isn’t public.

Economic Slowdown

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was little changed at 3.4 percent, after touching a three-week low of 3.36 percent earlier, data compiled by Bloomberg show.

The preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 49.2 for March, missing the median estimate of 50.5 in a Bloomberg survey and down from February’s 50.7. Numbers below 50 indicate contraction. Asia’s largest economy is targeting growth of about 7 percent this year, the slowest goal in more than 15 years.

The yield on China’s sovereign bonds due September 2024 rose one basis point, or 0.01 percentage point, to 3.53 percent, according to prices from the National Interbank Funding Center. ING predicts more policy rate cuts this year and forecasts the 10-year yield will fall to 3.20 percent by end-2015, according to its report.

The Ministry of Finance sold 20 billion yuan of three-year notes at 3.22 percent Wednesday, according to a statement on the website of China Central Depository & Clearing Co. That compared with the median estimate of 3.25 percent in a Bloomberg News survey.

— With assistance by Helen Sun

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