People’s Bank of China might inject more cash

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People’s Bank of China might inject more cash

China’s one-year interest-rate swaps fell for a second day after the central bank signaled it may inject more cash into the financial system.

The People’s Bank of China asked banks to submit orders for 14-day reverse-repurchase agreements this morning as well as for 28-day repurchase contracts, according to a trader at a primary dealer required to bid at the auctions. The authority added 17 billion yuan ($2.8 billion) to the system Tuesday at a yield of 4.4 percent using seven-day reverse repos, the first time it has conducted such operations since February.

“The message is still a positive sign that the central bank would like to ease the tight liquidity situation,” said Rees Kam, a strategist at SJS Markets, a Hong Kong-based financial services company that specializes in fixed income. “Rates are likely to stabilize.”

The one-year swap contract, the fixed cost to get the floating seven-day repurchase rate, fell one basis point, or 0.01 percentage point, to 3.99 percent as of 10:30 a.m. in Shanghai. The contract rose two basis points this month.

The seven-day repo rate, a gauge of the availability of cash in the banking system, dropped four basis points to 4.96 percent, according to a weighted average compiled by the National Interbank Funding Center. It fell 120 basis points this month after reaching a record 12.45 percent on June 20.

A total of 85 billion yuan of central bank bills will mature this week, compared with none last week.

Authorities will maintain steady second-half expansion amid “extremely complicated domestic and international conditions,” the Xinhua News Agency reported Tuesday after a meeting led by President Xi Jinping. China will keep a prudent monetary policy and a proactive fiscal stance, Xinhua said. The government is targeting 7.5 percent growth this year, a goal that could be under threat after expansion slowed for a second quarter in the three months through June. Bloomberg
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