BEIJING, May 20 — China’s benchmark money-market rate rose the most in three weeks as an approaching deadline for tax payments reduced the supply of cash.

Companies need to file claims by the end of May and commercial lenders must park the money for the payments at the central back by early June. The People’s Bank of China sold 35 billion yuan (RM17.99 billion) of 28-day repurchase contracts at 4 per cent today, compared with sales of 87 billion yuan on May 15, according to a statement on the website.

The seven-day repurchase rate, a gauge of funding availability, gained 28 basis points, the most since April 28, to 3.37 per cent as of 422pm in Shanghai, according to a weighted average compiled by the National Interbank Funding Centre.

The rate touched 3.5 per cent earlier, the highest level since May 4.

“The pressure from tax payments is driving more banks to borrow money in the market, driving up the rates,” said Yan Yan, a Shanghai-based fixed-income analyst at China Guangfa Bank Co. “Money rates will probably be elevated in the next couple of weeks, until the tax payments finish.”

One-year interest-rate swaps, the fixed cost to receive the floating seven-day repo rate, rose two basis points, or 0.02 per centage point, to 3.78 per cent, according to data compiled by Bloomberg. The yield on government bonds due March 2024 climbed one basis point to 4.20 per cent, according to the China National Interbank Funding Centre.

China plans to cut its reliance on financing vehicles selling bonds on behalf of regional authorities to fund local projects, according to a statement on the government’s website. 

The National Development and Reform Commission, the top economic planning agency, issued new guidelines that will instead allow local governments to offer debt directly. — Bloomberg