China's benchmark rate money market rose to a maximum of three years

China's benchmark rate money market rose to a maximum of three years, on speculation a shortage of funds will worsen as banks hoard cash before the New Year holiday.

The repurchase rate recovered to seven days after the central bank pumped a total of 26 billion yuan (3.9 billion) of capital in the financial market this week, sixth weekly injection net. Policy makers on December 10 ordered lenders to park more money with the central bank for the third time in five weeks to curb inflation.

"Banks are collecting money to prepare for the demand for cash withdrawal during the holidays and to meet the requirement of loan-deposit ratio at the end of each month," said Liu Junyu, bond analyst with Shenzhen-based China Merchants Bank Co., the sixth largest lender in the nation. "Everyone is very short of money after making payments for the reserve ratio rise on Monday."

The interest rate of seven days, which measures the cost of loans between banks, rose 150 basis points to 5.67 percent, the highest since October 2007, according to a published daily fixing at 11 hours by the National Center for interbank funding. That was the biggest daily gain since June 2008.

The People's Bank of China sold 1 billion yuan in bonds to three months, with a yield of 1.8131 percent in open market operations, unchanged for the sixth consecutive week, according to a statement posted on its website.

The government bond yield 3.28 percent due in October 2020 rose 3.5 basis points to 3.80 percent, Interbank funding data center shown. interest rate swaps for one year, or the fixed cost for receiving the variable interest rate of seven-day repurchase, up eight basis points to 3.15 percent.

The yuan was little changed at 6.6431 per dollar as of 4:30 pm in Shanghai, the China Foreign Exchange Trade System.

Delivery within twelve months rose 0.1 percent to 6.5043 per dollar, reflecting the currency bets will strengthen 2.2 percent in a year.