PBOC Adds Funds as Year-End Cash Demand Rises Before IPOs Start

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  • One-month Shibor at seven-week high ahead of eight share sales
  • Ten-year sovereign bond yield drops to lowest since 2009

The People’s Bank of China added funds to the financial system as cash demand increased ahead of the year-end and new share sales.

The central bank conducted 30 billion yuan ($4.6 billion) of seven-day reverse-repurchase agreements in its open-market operations on Thursday at a yield of 2.25 percent, resulting in a net injection of 10 billion yuan this week. A benchmark money rate rose to a seven-week high as the China Securities Regulatory Commission said Tuesday the last eight initial public offerings from the 28 that were previously suspended will restart.

“Demand for longer-term funds that cover the year-end is rising, driving up rates,” said Frank Sun, an analyst at CFETS-ICAP International Money Broking Co. in Shanghai. “In the meantime, short-term money rates remain stable amid ample fund supply.”

The one-month Shanghai interbank offered rate, a daily fixing of borrowing costs, climbed for a third day and added two basis points to 2.76 percent. The seven-day repo rate closed little changed at 2.35 percent, according to the National Interbank Funding Center.

Economists at the central bank cut their 2015 China growth forecast to 6.9 percent from 7 percent, according to a working paper by its research bureau posted on the website Wednesday. Consumer prices will rise 1.7 percent in 2016 versus 1.5 percent this year, wrote the bureau staff led by the unit’s chief economist Ma Jun.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was steady at 2.33 percent. The yield on 10-year government bonds fell for a third day, declining three basis points to 2.98 percent, National Interbank Funding Center prices show. That matched the level reached on Oct. 27, which was the lowest for a benchmark of that maturity since 2009.