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Shanghai - Most of China’s short-term money-market rates fell to their lowest levels in a week or more as the central bank used its daily open-market operations to keep the financial system flush with cash.
The People’s Bank of China auctioned 10 billion yuan of reverse-repurchase agreements on Monday, after using the contracts to inject a net 1.235 trillion yuan in January, the most on record.
It said last week that operations would be conducted each day between January 29 and February 19, except for during the week-long Chinese New Year holiday that starts February 7. Usually, the auction windows are on Tuesdays and Thursdays.
The 14-day repurchase rate fell as much as seven basis points to 2.75%, the lowest since January 20, before paring the decline to 2.81% as of 10:47, a weighted average from the National Interbank Funding Center shows.
The one-month rate declined as much as 10 basis points to 3.10%. The seven-day rate, which will settle after the holiday, rose 16 basis points to 2.43%.
“Following the huge injections last month, the market is no longer tight,” said Lin Yijian, an analyst at Guangzhou Rural Commercial Bank.“The seven-day repo rate jumped today because it now covers the holidays, so it’s approaching the 14- day level.”
Policy makers are keeping a lid on borrowing costs to support the economy as a seasonal pickup in demand for funds before the Chinese New Year break comes at a time of record capital outflows. An official gauge of China’s factory output signaled conditions deteriorated for a record sixth month in January, data showed Monday.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, rose one basis point to 2.29%, data compiled by Bloomberg show. The central bank gauged demand for 14- and 28-day reverse repos this week, without asking lenders to submit orders for repos and bills, according to traders at primary dealers required to bid at the auctions.
