China Swap Drops to This Year’s Low as Reverse-Repo Rates Eased

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China’s one-year interest-rate swap fell to this year’s low after the central bank cut borrowing costs in open-market operations to stimulate economic growth.

The People’s Bank of China sold 15 billion yuan ($2.4 billion) of seven-day reverse-repurchase agreements used to add funds at 3.45 percent Thursday, compared with 3.55 percent at the two auctions last week, according to a statement on the website. A government report Friday may show consumer prices rose 1.3 percent in March, slowing from February’s 1.4 percent and below the annual target of 3 percent, according to the median estimate in a Bloomberg survey.

“The PBOC is still trying to lower domestic funding costs as economic indicators are likely to remain weak,” said Banny Lam, co-head of research at Agricultural Bank of China International Securities Co. in Hong Kong. “With inflation remaining low, there’s room for lower interest rates.”

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, dropped three basis points to 3.09 percent as of 4:38 p.m. in Shanghai, data compiled by Bloomberg show. The contracts fell to 3.08 percent earlier, the lowest level since December.

The seven-day repo rate, a gauge of interbank funding availability, declined as much as 11 basis points to a five-month low of 2.98 percent, a weighted average compiled by the National Interbank Funding Center shows. It later pared the loss to 3.02 percent.

Sovereign bonds rose. The yield on the December 2024 notes dropped two basis points, or 0.02 percentage point, to 3.71 percent, prices from the National Interbank Funding Center show.

China will announce trade and first-quarter gross domestic product figures next week.

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