Finance: China bond yields rise on squeeze, CPI worries

(Reuters)
Updated: 2007-02-12 15:12

China's money market and bond yields rose across the curve on Monday because of a temporary funding squeeze and expectations that a high January inflation number will be announced this week, traders said.

The weighted average seven-day repo rate jumped to a multi-year high of 4.5511 percent by midday from 4.2001 percent on Friday.

The 90-day central bank bill yield in the secondary market was indicated at 2.6050 percent bid against 2.5920 percent, according to Reuters Reference Rates.

The seven-day repo was above the weighted average 14-day repo rate, at 4.4190 percent.

Traders said this showed most of the liquidity squeeze was due to factors which would disappear in a couple of weeks: the Shanghai IPO of Ping An Life Insurance, for which retail subscriptions were taken on Monday, and seasonally high demand for next week's Chinese New Year holidays.

Repo rates are likely to start to fall back by the end of this week as unused funds from the IPO will return to the money market beginning on Wednesday. Traders forecast the seven-day repo will slide to about 2.3-2.5 percent after the holidays.

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