China debt sale fails for third time in 2011

China’s Ministry of Finance failed to sell all its debt on auction for the third time in 2011 as tight credit markets hit the country’s banks, Bloomberg reported. The Ministry sold about US$1.82 billion of its targeted US$2.32 billion. Lack of demand was blamed on tight monetary conditions: The seven-day repurchase rate, a measure of interbank liquidity, has almost doubled in the past month after the People’s Bank of China raised banks’ required reserve ratios. “Demand has declined as a cash shortage continues,” noted Guo Caomin, a bond analyst at Industrial Bank (601166.SH). “The cash crunch will probably last at least until the middle of this month.” The Ministry of Finance also failed to sell all its debt offered at auctions on June 17 and May 13 of this year.