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China Money Rate Drops for Fourth Day as PBOC Seen Adding Cash

China’s benchmark money-market rate declined for a fourth day amid speculation the central bank will ensure adequate funds are available as reports provide mixed messages on the state of Asia’s biggest economy.

The People’s Bank of China sold 18 billion yuan ($2.9 billion) of repurchase agreements in open-market operations yesterday, less than the 30 billion yuan of contracts that matured, following net injections in each of the last three weeks. China’s services output picked up in August, data showed today, while reports earlier in the week indicated manufacturing growth is weakening.

“Concern over the growth outlook remains,” said Wee-Khoon Chong, head of Asia ex-Japan rates strategy at Nomura Holdings Inc. in Singapore. “Our view is that the bias for rates remains on the downside given the uncertain macro domestic outlook.”

The seven-day repo rate, a gauge of funding availability between banks, slid 12 basis points, or 0.12 percentage point, to 3.37 percent as of 11:09 a.m. in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. That was the biggest drop since Aug. 18.

The PBOC gauged demand for 14-day and 28-day repurchase contracts tomorrow, according to a trader at a primary dealer required to bid at the auctions.

The non-manufacturing Purchasing Managers’ Index advanced to 54.4 from 54.2 in July, the National Bureau of Statistics and China Federation of Logistics and Purchasing said in Beijing. A comparable gauge from HSBC Holdings Plc and Markit Economics surged to 54.1, from 50 in July. Measures tracking manufacturing were released on Sept. 1 and showed declines, while remaining above the 50 level that marks the dividing line between expansion and contraction.

New Loans

Policy makers have reduced reserve-requirement ratios for some lenders this year to support lending and investment. New loans by China’s four biggest banks totaled about 250 billion yuan in August, Shanghai Securities News reported today, without citing anyone. That compares with 210 billion yuan in July, central bank data show.

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, increased three basis points to 3.61 percent, according to data compiled by Bloomberg.

The yield on government bonds due June 2024 rose one basis point to a one-week high of 4.27 percent, according to data from the National Interbank Funding Center.

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