The government of China does not draw enough demand in a sale bill for the second time in a month

The government of China does not draw enough demand in a sale bill for the second time in a month as seasonal demand and higher cash reserve ratios on the left banks with less money.

The Ministry of Finance sold 16.76 billion yuan ($ 2,530,000,000) of securities to 91 days, below the planned target of 20 billion yuan, according to a statement on the website of Chinabond, the nation's largest home debt clearance. The average yield was 3.68 percent gain, above the 3.22 percent rate for similar debt maturity in the secondary market yesterday.

China needs to return to a "prudent monetary policy" to contain prices and money supply control, the People's Bank of China said in a statement posted on its website today. While inflationary pressures are increasing, regulators will allow a reasonable growth of loans, the statement said.

"Banks are very short of cash," said Qu Qing, bond analyst at Shenyin Wanguo Securities Co. in Shanghai. "Given the cash crunch, the central bank probably will not announce any measures of adjustment later this year."

The repurchase rate seven days, which measures the cost of loans between banks, has more than doubled in the last two weeks and yesterday reached a maximum of three years of 5.67 percent, according to daily fixings published at 11 hours by the National Center for interbank funding. The rate fell seven basis points to 5.60 percent today.

Rate Swaps

The interest rate swap one year, the fixed cost for receiving floating payments, has fallen 25 basis points from a maximum of two years he played on 29 November, reflecting ease speculation the central bank will raise rates interest as the credit crunch worsened. The index fell one basis point today to 3.14 percent. Policy makers on December 10 ordered lenders to set aside more money as reserves for the third time in five weeks to contain inflation.

The lack of liquidity has also undermined the demand for tickets sold by the central bank. The monetary authority has sold one billion yuan in tickets a year in each of his last four auctions per week, amounts lower sales since October 2007.

"The market is desperate for cash," said Chen Liang, bond analyst at Guohai Securities Co. in Shenzhen. "It's too expensive to park your money with the debt at a given price the interest rate of seven days has risen above 5 percent."

Acceleration of inflation

The yield of 3.67 percent in October 2020 was little changed at 3.81 percent, and the price of safety was at 98.89, according to the China Interbank Bond Market.

The Ministry of Finance sold 11.55 billion yuan in bills to 91 days on 26 November, less than the expected 20 billion yuan. The average yield was 2.74 percent. China's inflation accelerated to a maximum of 28 months from 5.1 percent in November, the statistics office said on 11 December.

The yuan has risen 0.3 percent since 06 December, when 30 senators sent a letter to Chinese Vice Premier Wang Qishan, calling for the yuan to "appreciate significantly" before the visit of President Hu Jintao Washington next month.

The currency strengthened 0.24 percent to 6.6270 per dollar at 4:30 pm close, the biggest gain since 09 November, according to the China Foreign Exchange Trade System. It increased by 0.43 percent this week, the biggest weekly gain since October.

"Some banks may be buying the local currency in the foreign exchange market because it is difficult to borrow money in fixed income," said Li Tao, a foreign exchange trader at Shenzhen Development Bank Co. in Shenzhen. "There is also the concern of the appreciation may fastest ahead of the visit of President Hu Jintao."

Delivery within twelve months rose 0.13 percent to 6.4993 per dollar, reflecting the currency bets strengthen 2 per cent in a year.