China Swaps Rise From 19-Month Low on Europe Optimism, Exports

China’s one-year interest-rate swaps rebounded from their lowest levels in 19 months after Europe made progress in tackling its debt crisis and local data showed exports beat estimates.

Yuan-denominated government bonds fell after Spain asked euro-region governments over the weekend for as much as 100 billion euros ($126 billion) to help shore up its banking system. Asian stocks climbed after China’s exports grew 15.3 percent last month, more than double the pace analysts forecast.

“Today’s slight increase in interest-rate swaps may just be due to better market sentiment after Spain sought help,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “The Chinese data wasn’t as bad as what had been feared. There seems to be not much downside in the swaps in the near term.”

The one-year swap rate, the fixed cost needed to receive the seven-day repurchase rate, increased seven basis points, or 0.07 percentage point, to 2.46 percent in Shanghai, according to data compiled by Bloomberg. The rate touched 2.30 percent on June 8, the lowest since October 2010.

Interest-rate swaps concluded a fifth straight week of losses on June 8 as the People’s Bank of China lowered its one- year lending and deposit rates by a quarter of a percentage point to 6.31 percent and 3.25 percent, respectively. The central bank also allowed banks to start offering deposit rates by as much as 10 percent above the official rate and doubled the maximum discount for loans to 20 percent.

New Lending

Local-currency loans were 793.2 billion yuan ($125 billion), the People’s Bank of China said on its website today. That compared with the 700 billion yuan median forecast in a Bloomberg News survey of 29 economists and 681.8 billion yuan in April. M2 money supply grew 13.2 percent last month from a year earlier, compared with an estimate of 12.9 percent.

The monetary authority didn’t gauge demand for bill sales this week, suggesting it won’t drain cash from the system, according to a trader at a primary dealer required to bid at the auctions.

The seven-day repurchase rate, a gauge of funding availability in the financial system, declined four basis points to 2.42 percent, according to a weighted average compiled by the National Interbank Funding Center. The yield on the government’s 3.51 percent bonds due February 2022 increased five basis points to 3.35 percent.

To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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

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