China Swap Rate Rises as Manufacturing Report Shows Improvement

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China’s interest-rate swaps rose as an increase in a preliminary manufacturing gauge signaled the country’s economic slowdown could be bottoming out.

A flash Purchasing Managers’ Index was 49.1 for May, HSBC Holdings Plc and Markit Economics reported Thursday. That compared with a final reading of 48.9 in April and the median estimate of 49.3 in a Bloomberg survey. Fifty is the dividing line between expansion and contraction. The People’s Bank of China halted open-market operations for a fifth straight week.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, advanced three basis points to 2.32 percent as of 4:42 p.m. in Shanghai, data compiled by Bloomberg show. It has tumbled 122 basis points, or 1.22 percentage points, this quarter and reached a four-year low of 2.15 percent on May 15.

“Today’s flash PMI showed economic conditions aren’t worsening, but as it’s below 50, there is no obvious recovery,” said Guo Wei, an analyst at Bank of Nanjing Co. in the city. “Given the slide in money rates in the past two months, we expect them to consolidate at the current level.”

The yield on the sovereign bonds due April 2025 rose two basis points to 3.45 percent, according to National Interbank Funding Center prices.

The interest rate for overnight loans on the Shanghai Stock Exchange fell 95 basis points to 2.54 percent after rising as high as 6.5 percent earlier. Twenty initial public offerings from Tuesday through Thursday have locked up 2.8 trillion yuan ($452 billion) of funds, according to a Bloomberg survey of six brokerages.

Repo Rate

The seven-day repo rate, a gauge of interbank funding availability, gained two basis points to a one-week high of 1.95 percent, a weighted average from the National Interbank Funding Center shows.

Transactions of exchange repos totaled 17.5 trillion yuan last month, compared with 28.5 trillion yuan of comparable loans in the interbank market, according to data from the Shanghai exchange and the National Interbank Funding Center.

Xinjiang autonomous region auctioned 5.9 billion yuan of local-government bonds Thursday at costs matching sovereign notes, statements on the China Central Depository & Clearing Co. website show. Hubei province will sell 20 billion yuan of the notes on May 27.

— With assistance by Helen Sun

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