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China Five-Year Swap Drops to Four-Month Low on Bird Flu Concern

April 8 (Bloomberg) -- China’s five-year interest-rate swaps dropped to a four-month low on speculation a bird flu outbreak and property market curbs will slow the economy.

Authorities tried to ease concern that a new strain of avian influenza will spark an epidemic as authorities reported three more infections of the deadly H7N9 virus that’s killed six people. The nation’s largest cities, including Beijing and Shanghai, restricted multiple home purchases this month after policy makers asked local governments to step up efforts to cool the housing market.

“There have been worries that the bird flu and the property curbs will hurt the economy,” said Liu Junyu, a Shenzhen-based bond analyst at China Merchants Bank Co., the nation’s sixth-biggest lender.

The offshore five-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined one basis point to 3.49 percent as of 5:05 p.m. in Shanghai, according to data compiled by Bloomberg. It touched 3.47 percent earlier, the lowest level since Nov. 26.

The central bank gauged demand today for seven- and 14-day reverse-repurchase contracts to be offered this week and asked banks to submit orders for 28-day repurchase agreements, according to a trader required to bid at the auctions.

The seven-day repurchase rate, which measures interbank funding availability, dropped four basis points, or 0.04 percentage point, to 3.28 percent from yesterday’s close, according to a weighted average rate compiled by the National Interbank Funding Center. China’s bond market opened yesterday following public holidays on April 4 and April 5.

The yield on the 3.52 percent government notes due February 2023 was steady at 3.48 percent from yesterday, according to the Interbank Funding Center.

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

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

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