China Money Rate Increases Most Since March as Banks Hoard Cash

  • 14-day repurchase rate climbs 13 basis points to 2.92 percent
  • Central bank injections overwhelmed by quarter-end demand

China’s money-market rate jumped by the most in almost three months as injections of funds by the central bank were overwhelmed by quarter-end demand.

The 14-day repurchase rate, a gauge of interbank funding availability, climbed 13 basis points to 2.92 percent as of 4:30 p.m. in Shanghai, the most since March 31, according to National Interbank Funding Center prices. The benchmark seven-day repo rate increased by the most in a month to 2.33 percent.

Interbank borrowing costs tend to rise toward the end of every quarter because Chinese commercial lenders hoard cash to meet regulatory checks, with the shortage being particularly acute at the middle and end of each year. The People’s Bank of China has been stepping up injections since last week.

“The seasonal factor always tightens China’s interbank money market at the end of every six months as funding demand increases,” said Terry Siu, treasurer at Wing Lung Bank Ltd. in Hong Kong. “We expect the PBOC to use all viable ways to release liquidity to smooth out the spike. It should be a short-term phenomenon.”

The central bank pumped in a net 180 billion yuan ($27 billion) via reverse repos this week, exceeding last week’s total of 105 billion yuan, according to data compiled by Bloomberg.

The yield on sovereign notes due May 2026 fell one basis point to 2.93 percent, the lowest since May 13, according to National Interbank Funding Center prices. The cost of one-year interest-rate swaps, the fixed payment to receive the seven-day repo rate, fell two basis points to 2.51 percent, data compiled by Bloomberg show.

— With assistance by Helen Sun

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