China Ups 1-Year Bill Yield to Taper Lending

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Jan. 12 – The People’s Bank of China increased its benchmark one-year bill yield by 8 basis points for the first time in 5 months.

The one year bills were sold at a yield of 1.84 percent in an effort to taper huge bank lending amid fears of inflation and the property market overheating. “The central bank may be seeking a stronger tightening policy than expected,” said Jiang Chao, a fixed-income analyst in Shanghai at Guotai Junan Securities told Bloomberg. “We expect the central bank will raise the reserve-requirement ratio one time in March.

Bank lending in China is usually the strongest during the beginning of the year. The central bank said it wants to develop “moderate” credit growth in for this year after a deluge of loans worth RMB9.21 trillion during the first 11 months of 2009. Just last week, banks lent around RMB100 billion reports the official China Securities Journal.