China Money Rates Seen Rising Next Week as IPOs Lock Up Funds

China’s money-market rates are set to rise as initial public offerings tie up an estimated $886 billion of funds next week, according to SWS Research Co.

The China Securities Regulatory Commission has approved 24 new share sales, according to a statement released Tuesday. The amount of locked-up funds will peak at 5.5 trillion yuan ($886 billion) on June 19, with an IPO by Guotai Junan Securities Co. to be China’s largest in five years, SWS Research analysts led by Shanghai-based Chen Kang wrote in a note Wednesday. SWS Research is a unit of China’s second-largest listed brokerage.

“The huge IPOs will increase demand for funds, bringing problems on the money market,” said Wang Ming, chief operations officer at Shanghai Yaozhi Asset Management LLP, which oversees 4 billion yuan of fixed-income securities. “Investors should watch for potential impact on liquidity, especially as it’s the quarter-end when financial institutions tend to grab cash to meet regulatory checks.”

The seven-day repurchase rate, a gauge of interbank funding availability, rose two basis points to a one-week high of 2.04 percent in Shanghai, a weighted average by National Interbank Funding Center shows.

The rate will probably average 2.5 percent in June, up from May’s 2.06 percent, according to a Bloomberg survey of five traders and analysts conducted on May 29. The benchmark has risen every June in the past five years on lenders’ quarter-end demand for cash.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, climbed five basis points to 2.42 percent, data compiled by Bloomberg show. That’s the biggest increase in a week.

The Ministry of Finance has doubled a quota for local governments to convert high-cost maturing debt this year into low-yielding municipal bonds to 2 trillion yuan, according to a statement posted on its website.

The yield on sovereign notes due 2025 rose three basis points, the most since June 1, to 3.60 percent, according to National Interbank Funding Center prices.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE