China’s one-year government bonds fell, with the yield rising from the lowest level this month, as demand for safer assets dropped amid optimism a recovery in the world’s second-largest economy is gathering pace.
The Shanghai Composite Index of stocks rose, after rallying by the most in three years on Dec. 14. China’s new leaders vowed to target “sustained and healthy development” as they maintain a “prudent” monetary policy and “proactive” fiscal stance, according to a report yesterday by the state-run Xinhua News Agency after the annual central economic work conference in Beijing.
“There’s a better economic outlook for 2013 and we have better-performing equities,” said Frances Cheung, a strategist at Credit Agricole CIB in Hong Kong. “I’m looking for the yield curve to steepen.”
The yield on the 2.94 percent government bonds due October 2013 rose one basis point, or 0.01 percentage point, to 2.86 percent in Shanghai, according to the National Interbank Funding Center. It has climbed 24 basis points this year. The Dec. 14 level of 2.85 percent was the lowest since Nov. 28.
The People’s Bank of China gauged demand for sales of seven-, 14- and 28-day reverse-repurchase contracts this week, according to a trader at a primary dealer required to bid at the auctions. The central bank also asked lenders to submit orders for 28- and 91-day repurchase contracts this morning, the trader said.
The seven-day repurchase rate, a gauge of interbank funding availability, increased three basis points to 3.03 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate fell 2.57 percentage points this year.
The one-year interest-rate swap, the fixed cost to receive the seven-day repo rate, dropped three basis points to 3.33 percent, according to data compiled by Bloomberg.