THE People's Bank of China may suspend a scheduled sale of three-month bills today as banks hoard cash before the New Year holidays, pushing money-market rates to the highest since October.

The central bank didn't gauge demand for the securities yesterday morning, said two traders who declined to be named as the information isn't public.

The seven-day repurchase rate, a measure of interbank funding availability, hit 5 percent yesterday as lenders tried to boost capital for year-end needs.

"It's probably a temporary suspension because of the cash crunch," said Liu Junyu, a bond analyst at China Merchants Bank Co, the nation's sixth-biggest lender, in Shenzhen. "The central bank may cut the reserve-requirement ratio before the Lunar New Year to add liquidity to the financial system."

The seven-day repurchase rate rose 35 basis points to 4.8 percent as of 4:30pm in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It hit 5 percent yesterday and on Tuesday, the highest level since October 31. China's markets will be closed on Monday and Tuesday.

A total of 13 billion yuan (US$2.1 billion) of central bank bills and repurchase contracts will mature this week, down from 17 billion yuan last week, Liu said.

Source:shanghaidaily