China Swaps Rise on Speculation of More Monetary Tightening
China’s interest-rate swaps rose the most in more than a week on speculation the central bank will raise the amount of cash banks must set aside as reserves by the end of this week.
The last reserve-requirement increase took effect Feb. 24, the fifth since October, with the ratio rising to 19.5 percent from 19 percent. Policy makers may announce another hike as soon as March 4, said Pin Ru Tan, a Singapore-based strategist at Royal Bank of Scotland Group.
“When we reach the end of next week, there’ll be 350 billion yuan ($53.2 billion) worth of central bank bills that would’ve matured since the last increase,” said Tan. There’s a chance of another to “mop up liquidity,” she said.
The one-year swap contract tied to the seven-day repurchase rate climbed six basis points to 3.77 percent as of 11:47 a.m. in Shanghai, according to data compiled by Bloomberg. The repo rate, a gauge of the availability of funds, was little changed at 3.01 percent compared with yesterday’s 3.03 percent, according to a daily fixing from the National Interbank Funding Center published at 11 a.m.
The People’s Bank of China sold 1 billion yuan of one-year bills today in open market operations, keeping the yield unchanged for a second week at 2.9972 percent. The central bank added funds to the financial system for a 15th week in the five days ended Feb. 24, pumping in 76 billion yuan, according to data compiled by Bloomberg.
The yield on the government’s 3.77 percent bond due December 2020 rose two basis points to 3.96 percent, according to Chinabond, the nation’s biggest debt-clearing house. A basis point is 0.01 percentage point.
To contact Bloomberg News staff for this story: Sonja Cheung in Beijing at +86-10-6649-7574 or scheung58@bloomberg.net
--Sonja Cheung. Editors: Simon Harvey, Andrew Janes
To contact Bloomberg News staff for this story: Sonja Cheung in Beijing at +86-10-6649-7574 or scheung58@bloomberg.net
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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