China PBOC Raises 3-Month Bill yield, Lowers 3-Year

BEIJING, May 21 -- China's central bank sold three-month bills at a higher yield and three-year securities at a lower rate, reflecting Chinese banks' preference for longer-dated debt after the government tightened curbs on property lending.

The People's Bank of China sold the shorter-maturity paper at 1.45 percent, compared with 1.41 percent last week, according to a statement on its website today. It issued three-year notes at a yield of 2.70 percent, lower than 2.72 percent on May 6 and higher than yesterday's secondary-market trading rate of 2.59 percent for similar-maturity existing securities.

It was the first time the central bank pushed up rates on three-month bills since Jan 21, while yields dropped at each bi-weekly auction since sales of three-year securities resumed on April 8.

"The increase in three-month bill yield shows the PBOC wants to boost the attractiveness of shorter-dated securities, which will help it better use quantitative tools to drain liquidity," said Hu Hangyu, a Beijing-based bond analyst at Citic Securities Co, China's biggest listed brokerage.

Consumer prices rose 2.8 percent in April, and property values climbed at a record pace, the government reported on May 11. China has raised lenders' reserve-requirement ratios three times this year to help slow inflation and drain funds, and left the benchmark lending rate unchanged at 5.31 percent since December 2008.

"The central bank is trying to curb inflation by pushing up the three-month bill yield because any change in the open- market interest rates will send an important policy signal to the market," said Jiang Chao, an analyst in Shanghai at Guotai Junan Securities Co, the nation's largest brokerage by revenue. "At the same time, it lowers the three-year bill yield to damp the market's speculation about an imminent interest-rate hike."

The central bank offered 120 billion yuan ($17.6 billion) of the three-year securities and 6 billion yuan of three-month securities at the auction today.