China yields rise sharply on 1-year bill auction
Published May 22nd, 2007
China’s money market rates and bond yields rose sharply across the curve on Tuesday after the central bank auctioned one-year bills at a higher-than-expected yield.
The bank sold 10 billion yuan ($1.3 billion) of bills in its regular money market operation at 3.0928 percent, above market forecasts of between 3.02 and 3.07 percent. The weekly auction yield had stayed at 2.9760 percent for the past six weeks.
Traders viewed the jump largely as a technical adjustment after Friday’s announcement of a hike in benchmark one-year lending and deposit rates by 0.18-0.27 percentage point, which brought the deposit rate to 3.06 percent.
“The hike in deposit rates has raised commercial banks’ cost of funding by 15 basis points for one year and 18 bps for three years, so bill yields should theoretically rise by at least those amounts at auctions,” said an analyst at a major Chinese bank.
Some in the market were surprised that the central bank had allowed the yield to jump by almost 12 bps at a single auction, especially given the relatively small size of the sale.
But they said there was now less room for the one-year yield to rise at the next auction, so bill yields could climb more slowly in the secondary market in coming days.
Related Articles
