China Money Rate Drops Most in Three Weeks as PBOC Injects Funds

  • Central bank steps up cash injections on seasonal tax demand
  • Money market is tightly balanced, Fortune Securities says

China’s money-market rate declined the most in more than three weeks as the central bank stepped up cash injections and funds returned to the financial system following a convertible bond sale.

Issuance of such debt by Jiangsu Jiangnan Water Co. set for Friday had locked up an estimated 200 billion yuan ($31 billion), according to Huachuang Securities Co. The People’s Bank of China has stepped up injections in open-market operations, pumping in a net 260 billion yuan so far this week compared with 85 billion yuan in the March 14-18 period.

The seven-day repurchase rate, a benchmark gauge of funding availability in the banking system, fell six basis points, the most since March 1, to 2.31 percent, according to a weighted average from the National Interbank Funding Center. The rate climbed to a six-week high of 2.37 percent on Wednesday. Interbank borrowing costs tend to rise in the March-April period also because commercial lenders deposit corporate tax payments with the PBOC.

“Now that the convertible bond sale funds have returned to the financial system, and the central bank stepped up injections, its impact on the money market is alleviating,” said Chen Peng, a Shenzhen-based Fortune Securities Co. analyst. “With interbank liquidity tightly balanced, tax payments may have some impact going forward, but overall, money rates should be able to remain stable.”

The PBOC auctioned 60 billion yuan of seven-day reverse repos on Thursday, bringing the total sales so far this week to 350 billion yuan. That compares with 90 billion yuan of maturing contracts. 

— With assistance by Helen Sun

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