Money

Money market rate falls as PBOC adds cash

By Andrea Wong (China Daily)
Updated: 2011-06-03 14:13

TAIPEI - China's money-market rate dropped to a three-day low as the central bank injected the most cash into the financial system in five weeks.

The People's Bank of China (PBOC) added a net 81 billion yuan ($12.5 billion) of capital this week. China may increase the yuan's trading band, interest rates and banks' reserve-requirement ratios in June to curb inflation, the Shanghai Securities News reported on Wednesday, citing unidentified market participants.

"The capital injection is helping ease the cash shortage triggered by the reserve-ratio increase last month," said Tang Guohui, a bond trader at Industrial Securities Co in Shanghai.

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"If the PBOC really wants to hike the ratio again in June, it might do it during the first half." The seven-day repurchase rate dropped 38 basis points, or 0.38 percentage point, to 3.52 percent as of 11:36 am in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.

The rate touched 5.32 percent on May 25, the highest level since Feb 23.

The PBOC has raised benchmark interest rates four times and boosted lenders' reserve requirement ratios by three percentage points since September.

One-year interest-rate swaps, the fixed cost needed to receive the floating seven-day repo rate, fell three basis points to 3.45 percent, according to data compiled by Bloomberg.

The yield on the 3.83 percent government bond due in January 2018 rose one basis point to 3.64 percent on Wednesday, according to the Interbank Funding Center.

Bloomberg News