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Money-market rate soars as banks scramble for liquidity

China’s money-market rate climbed to its highest level in more than three years as banks hoard cash to meet end-of-quarter liquidity requirements, Bloomberg reported. The seven-day repurchase rate, which measures interbank funding availability, has more than doubled since June 14, when the People’s Bank of China ordered banks to increase their reserves for the sixth time this year. In response, the central bank has suspended a bill sale that was planned for today, according to an announcement on its website yesterday. The seven-day repo rate rose 0.47 percentage points to 8.81% in Shanghai as of market close on Wednesday, according to data from the National Interbank Funding Center. Mid-day, it touched 8.93%, the highest level since October 2007. Meanwhile, the 14-day repo rate declined 1.25 percentage points to 7.34%, its biggest drop since February 1 – indicating that cash shortages will likely ease from the start of the next quarter, on July 1.

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