China Money Rate Advances Most in a Month as PBOC Pulls Funds

China’s benchmark money-market rate climbed the most in more than a month, driven up by quarter-end demand and a withdrawal of funds by the central bank.

The monetary authority has drained a net 135 billion yuan ($21 billion) from the financial system so far this week, data compiled by Bloomberg show. Interbank borrowing costs tend to rise in the March-April period as lenders have to deposit tax Payments with the central bank, while commercial lenders hoard cash at the end of each quarter to meet regulatory checks.

The seven-day repurchase rate, a benchmark gauge of funding availability in the banking system, rose five basis points to 2.36 percent as of 11:56 a.m. in Shanghai, according to a weighted average from the National Interbank Funding Center. Early data showed the rate advanced to 2.56 percent. A daily fixing compiled by the center climbed 12 basis points to 2.40 percent.

“The PBOC has been draining funds in open-market operations in the past three days at a time when lenders need to prepare cash at the quarter-end to prepare for regulatory checks,” said Li Liuyang, Shanghai-based chief financial market analyst at Bank of Tokyo-Mitsubishi UFJ (China) Ltd. “This may be affecting sentiment somehow, and tightened the market a bit, but there’s no way the PBOC will let the market tighten much.”

To contact Bloomberg News staff for this story: Helen Sun in Shanghai at hsun30@bloomberg.net. To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Robin Ganguly, Allen Wan

By: Bloomberg News

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