China’s money-market rate rose to the highest level in almost six weeks on speculation payments of cash for reserves decreased the supply of capital in the financial system. The yuan strengthened.
Chinese lenders have to park money with the central bank on the fifth, 15th and 25th of each month. The People’s Bank of China added a net 25 billion yuan (US$4 billion) to the banking system this week, a second weekly injection, according to data compiled by Bloomberg.
“It’s difficult to borrow money for seven days or less in the interbank market,” said Wang Huane, a senior bond trader at Qilu Bank Co (齊魯銀行) in Jinan, the capital of China’s Shandong Province. “Banks may have set aside a lot of cash yesterday to meet reserve requirements as deposits probably increased a lot at the end of last quarter.”
The seven-day repurchase rate, which measures interbank funding availability, gained 24 basis points to 4.23 percent as of 4:30pm yesterday in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. It touched 4.24 percent, the highest level since Feb. 27. China’s financial markets were closed for the first three days of the week.
The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined four basis points to 3.14 percent, according to data compiled by Bloomberg. The yield on the 3.94 percent government bonds due January 2021 was unchanged at 3.51 percent, according to the Interbank Funding Center.
The yuan rose 0.14 percent to 6.3063 yuan to the US dollar, trimming losses this week to 0.13 percent, according to the China Foreign Exchange Trade System. The currency’s one-month implied volatility, a measure of exchange-rate swings used to price options, fell five basis points yesterday to 2.15 percent.
The central bank weakened the daily fixing by 0.06 percent to 6.3072. The currency is allowed to trade as much as 0.5 percent either side of the so-called central parity rate.
Twelve-month non-deliverable forwards climbed 0.05 percent to 6.3335 per US dollar, a 0.4 percent discount to the onshore spot rate, according to data compiled by Bloomberg show.