China Money Rate Slides for Record 19th Day on PBOC Easing Bets

Updated on

China’s overnight money rate dropped for a record 19th day amid speculation the central bank will step up monetary easing to counter a slowdown in the economy.

Industrial output and new loans trailed estimates in April, data showed Wednesday. That followed worse-than-expected trade and inflation figures in the past week. The People’s Bank of China, which has lowered benchmark interest rates three times and cut reserve-requirement ratios twice since November, will ease further, according to a Bloomberg survey.

The overnight repurchase rate, a gauge of funding availability in the interbank market, fell eight basis points to

1.13 percent as of 4:25 p.m. in Shanghai, according to a weighted average by the National Interbank Funding Center. The seven-day repo rate dropped 11 basis points to 1.97 percent, sliding for an 11th day.

“The latest indicators show the economy may not revive in the short-term, so further easing measures are needed to support growth,” Guotai Junan Securities Co. analysts led by Shanghai-based Xu Hanfei wrote in a note Thursday. “Liquidity will remain ample.”

There will be one more interest-rate cut before year-end to lower the one-year lending rate from 5.1 percent, while the RRR will be reduced by 1 percentage point to 17.5 percent, according to a Bloomberg survey conducted May 10-12.

The PBOC didn’t sell repurchase or reverse-repurchase agreements in Thursday’s auction window, refraining from conducting open-market operations for a fourth week.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, fell five basis points, or 0.05 percentage point, to 2.21 percent, data compiled by Bloomberg show. It touched 2.17 percent, the lowest since October 2010. The yield on sovereign bonds due April 2025 fell two basis points to 3.40 percent, according to National Interbank Funding Center prices.