China’s one-year interest-rate swap climbed to a 20-month high on speculation banks are hoarding funds to meet quarter-end capital requirements, prolonging a cash shortage.
The People’s Bank of China added a net 92 billion yuan ($15 billion) into the financial system this week, down from 160 billion yuan in the five days through June 7, according to data compiled by Bloomberg. The one-year swap rate has increased every day since May 28, barring the three-day holiday at the start of the week.
“We are still bearish on the liquidity outlook because banks need to set aside cash for the mid-year accounting period and we will head into another tax payment season in July,” said Pin Ru Tan, an interest-rate strategist at HSBC Securities Asia Ltd. in Hong Kong.
The one-year contract, the fixed cost needed to receive the floating seven-day repurchase rate, gained two basis points to 3.67 percent as of 9:18 a.m. in Shanghai, the highest since October 2011, according to data compiled by Bloomberg.
The seven-day repo rose 11 basis points, or 0.11 percentage point, to 6.5 percent.