Agricultural Development Bank of China scaled back the size of two bond offerings for today by 31 per cent as the worst cash crunch in at least seven years curbs demand for the securities.
The Beijing-based policy bank said yesterday it would sell up to 8 billion yuan (HK$10.1 billion) of three-year notes, down from 13 billion yuan previously. An issue of five-year debt was reduced to 10 billion yuan from 13 billion yuan. The bank said it had options for each tenor that would allow the original issuance targets to be met.
The seven-day repurchase rate, a gauge of interbank funding availability, has averaged 6.03 per cent this month, the most since the National Interbank Funding Centre began compiling a weighted average in 2006.
The Finance Ministry sold 9.53 billion yuan of 273-day bills on Friday, less than its 15 billion yuan target, and Agricultural Development Bank raised 11.51 billion yuan in a sale of six-month bills on June 6, compared with its 20 billion yuan goal.
"The market is expecting the tight liquidity may last till early July," said Song Qiuhong, a bond analyst at Foshan Shunde Rural Commercial Bank in Foshan, Guangdong.
Agricultural Development Bank said the reduction in the maximum size of initial rounds was because of the "recent large fluctuations in bond market liquidity".
Export-Import Bank of China cited a similar reason last week when it halved sale targets for an auction of five and 10-year bonds on Friday to 10 billion yuan for each tenor.
Mainland financial firms are calling for the central bank to resume capital injections, as slowing economic growth and speculation the US Federal Reserve will rein in monetary stimulus curb demand for Chinese assets.
Yuan positions at financial institutions accumulated from foreign exchange sales, an indication of capital inflows, rose 66.86 billion yuan last month, the central bank said on Friday. It was the smallest gain since November.