China's central bank added a record 290 billion yuan ($46 billion) to the financial system using reverse-repurchase agreements, seeking to address a cash squeeze in the run-up to a weeklong holiday.
The People's Bank of China conducted 190 billion yuan of 28-day reverse repos and offered 100 billion yuan of 14-day contracts, according to a trader at a primary dealer required to bid at the auctions. Today's total is the highest for a single day in Bloomberg data going back to 2004.
“Record amounts of reverse repos are to meet the surge in cash demand before the quarter-end and the holidays,” said Liu Junyu, a bond analyst in Shenzhen at China Merchants Bank Co., the nation's sixth-biggest lender. “As the central bank steps up adding funds through reverse repos, it's unlikely to cut the reserve ratio this month.”
The seven-day repurchase rate, which measures interbank funding availability, gained 19 basis points to 4.70 percent as of 4:30 p.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 4.75 percent, the highest level since June 28.
The central bank kept the yields on 28- and 14-day reverse repos unchanged at 3.6 percent and 3.45 percent, respectively, the trader said. China's financial markets will be shut from Oct. 1 to Oct. 5 for the National day and mid-autumn holidays.
China's monetary authority also auctioned 40 billion yuan of six-month treasury deposits to commercial banks on behalf of the Ministry of Finance at a yield of 4.32 percent, according to a different trader. That compared with yesterday's six-month Shanghai interbank offered rate of 4.09 percent.
The PBOC lowered the amount of cash lenders must set aside as reserves in May to 20 percent, the second reduction this year.
China's one-year interest-rate swap, the fixed cost needed to receive the floating seven-day repo rate, declined seven basis points, or 0.07 percentage point, to 3.18 percent, according to data compiled by Bloomberg.
The yield on the 2.95 percent government bonds due August 2017 dropped five basis points to 3.23 percent, data from the Interbank Funding Center shows.
Bloomberg News
Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
- Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
