China Money Rate Drops to Three-Month Low After PBOC Injections

  • Long-term bond yield sinks to lowest level in three years
  • Industrial companies' profits fall most in at least four years

China’s benchmark money-market rate declined to a three-month low after the central bank injected funds to meet quarter-end and pre-holiday cash demand.

The People’s Bank of China pumped in a net 40 billion yuan ($6.3 billion) in open-market operations last week, and auctioned 60 billion yuan of treasury deposits that also add liquidity to the banking system. The injections helped to meet funding demand from commercial banks, as they tend to boost cash holdings at quarter-end to meet regulatory checks. Chinese markets will be closed Oct. 1-7 for public holidays.

The seven-day repurchase rate, a gauge of interbank funding availability, fell as much as 10 basis points to 2.28 percent in Shanghai, a weighted average from the National Interbank Funding Center shows. That was the lowest since June 17. It was 2.33 percent as of 4:30 p.m. local time, compared with an average 3.17 percent over the past 12 months.

“There’s ample liquidity in the interbank market despite the quarter-end and pre-holiday cash demand,” said Guo Wei, an analyst at Bank of Nanjing Co. in the city. “With PBOC taking care of the cash demand, we expect the money rates to remain stable.”

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was little changed at 2.47 percent.

Industrial profits declined by the most in at least four years in August, official data showed Monday. The monetary authority will in the coming quarter add to its five interest-rate cuts of the past year and further ease lenders’ reserve requirements to boost the economy, according to Bloomberg surveys published last week.

The yield on government bonds due July 2025 fell three basis points to 3.3 percent, according to prices from the National Interbank Funding Center. That’s the lowest rate for a benchmark 10-year note since August 2012, ChinaBond data show.

— With assistance by Helen Sun

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