China Guides Bill Yields 2n Time Higher This Week as Interest-Rate Increase Looms

Discussion in 'Economics' started by ASusilovic, Jan 12, 2010.

  1. Jan. 12 (Bloomberg) -- China’s central bank sold bills at a higher yield for the second time in a week, increasing the likelihood that policy makers will raise the benchmark interest rate in the first half of the year.

    The People’s Bank of China sold one-year bills at a yield of 1.8434 percent after last week guiding three-month rates higher. Lu Ting, a Bank of America-Merrill Lynch economist, said today’s move reflects banks’ expectations for a “moderate” increase in the benchmark rate in 2010.

    BNP Paribas SA brought forward its forecast for higher interest rates to the second quarter from the third and said the central bank may raise lenders’ reserve requirements by 50 basis points in February. Credit growth surged last week, local media reported yesterday, and the cabinet said Jan. 10 that the nation is on guard against inflows of speculative capital that may stoke inflation and create asset bubbles.

    “The likelihood of an increase in banks’ reserve ratios is on the rise,” said Tao Dong, a Hong Kong-based economist at Credit Suisse Group AG. “Aggressive” lending last week may have encouraged the central bank to guide bill yields higher, Tao said.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=akGQsSmvaG9Y&pos=3