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China Two-Year Swaps Approach 13-Month High on New Home Prices

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Dec. 18 (Bloomberg) -- China’s two-year interest-rate swaps rose, approaching a 13-month high, as data released today showed property prices increased in most cities.

The cost of a new home climbed in 53 of 70 cities surveyed in November from the month before, compared with 35 cities in October, according to a statistics bureau statement. The People’s Bank of China’s withdrew 125 billion yuan ($20 billion) from the financial system last week in money-market operations.

“The housing market is turning around and should add to gross domestic product growth in 2013,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong, wrote in a report today. “This means property curbs will remain in place for longer. To this end, the PBOC will tighten liquidity to increase money-market rates and slow demand for housing.”

The two-year interest-rate swap, the fixed cost to receive the seven-day repurchase rate, rose two basis points to 3.43 percent in Shanghai, according to data compiled by Bloomberg. The rate advanced 76 basis points, or 0.76 percentage point, this year and touched 3.49 percent yesterday, the highest level since Nov. 1, 2011.

China’s new leaders vowed to target “sustained and healthy development” as they maintain a “prudent” monetary policy and a “proactive” fiscal stance, according to a report on Dec. 16 by the state-run Xinhua News Agency after the annual central economic work conference in Beijing.

The People’s Bank of China sold 55 billion yuan of 28-day reverse-repurchase agreements at a yield of 3.6 percent today, and 20 billion yuan of seven-day contracts at 3.35 percent, according to a statement on its website.

The seven-day repurchase rate, a gauge of interbank funding availability, decreased three basis points to 3.01 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate fell 2.59 percentage points this year.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net