China’s benchmark money-market rate rose to the highest level in seven days after the central bank ordered lenders to set aside more funds as reserves.
The People’s Bank of China in October raised its benchmark interest rates for the first time since 2007 and last week boosted lenders’ reserve-requirement ratios by as much as a percentage point, seeking to tame the fastest inflation in two years. Consumer prices jumped 4.4 percent from a year earlier in October, exceeding all 28 estimates in a Bloomberg survey conducted before the data was released on Nov. 11.
“Repo rates are rising after last week’s hike in reserve requirements and rumors of further hikes,” said Frances Cheung, a Hong Kong-based senior strategist at Credit Agricole CIB. “We still see another 25 basis point-rise in interest rates, which could happen any time until year-end.”
The seven-day repurchase rate, which measures lending costs between banks, rose 8 basis points to 1.78 percent as of 4:08pm in Shanghai, according to data compiled by National Interbank Funding Centre. That’s the highest level since Nov. 4.
Two-year swaps, the fixed rate needed to receive the floating seven-day repo rate, rose four basis points to 3.04 percent, after increasing 12 basis points last week, data compiled by Bloomberg show.
The yield on the benchmark 3.29 percent bond due in September 2020 was little changed at 3.98 percent, data from the center showed. That’s the highest rate for a benchmark 10 year note since September 2008.
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