China One-Year Swap Completes Biggest Weekly Increase This Year

China’s interest-rate swaps had their biggest weekly increase this year on speculation the central bank will slow the pace of policy easing after inflation unexpectedly accelerated in January.

The consumer-price index rose 4.5 percent from a year earlier, the National Bureau of Statistics said on its website yesterday. That was more than all 33 forecasts in a Bloomberg News survey of economists and a median of 4 percent. The central bank drained a net 44 billion yuan ($7 billion) of capital from the financial market, a second week of withdrawals.

“The market has lowered policy-easing expectations following the CPI figure,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. “The higher-than-expected CPI will prompt the central bank to wait and watch before announcing any new easing measure.”

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose 17 basis points this week to 3.29 percent as of 5:03 p.m. in Shanghai, the biggest increase since the five days through Dec. 30, according to data compiled by Bloomberg. It declined five basis points, or 0.05 percentage point, today.

The seven-day repurchase rate, which measures interbank funding availability, gained 28 basis points this week to 3.63 percent in Shanghai, according to a weighted average rate compiled by the National Interbank Funding Center. It fell four basis points today.

The yield on the 3.99 percent government bond due June 2021 climbed 13 basis points in the week to 3.58 percent, according to quotes provided by the Interbank Funding Center. It was little changed today.

--Judy Chen. Editors: Sandy Hendry, Andrew Janes

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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