China’s one-year interest-rate swaps rose the most this week since June on speculation the central bank will refrain from cutting interest rates further after four reductions in seven months.
The People’s Bank of China doesn’t have much room to reduce borrowing costs as consumer-price gains could accelerate to 2 percent by the year-end, according to Haitong Securities Co. and Guotai Junan Securities Co. While new-home prices rebounded in June, a private Purchasing Managers’ Index gauge for July fell to the lowest in 15 months, according to data released Friday.
The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, climbed five basis points from a week ago to 2.54 percent as of 4:51 p.m. in Shanghai, data compiled by Bloomberg show. That’s the third weekly increase and the biggest since the period ended June 19.
“There are signs of improvement in the economy, but it remains to be seen how solid it is,” said Wang Ming, chief operations officer at Shanghai Yaozhi Asset Management LLP, which oversees 4 billion yuan ($644 million) of fixed-income securities. “Further pro-growth measures are necessary, but they could be structural or targeted policies.”
The seven-day repo rate, a measure of interbank funding availability, rose 13 basis points this week to 2.52 percent, a weighted average from the National Interbank Funding Center showed. It retreated two basis points on Friday.
The yield on sovereign bonds due April 2025 fell four basis points from July 17 and one basis point Friday to 3.49 percent, prices from the National Interbank Funding Center show. That’s the lowest since July 9.
The Ministry of Finance auctioned 30-year bonds at 3.94 percent Friday, according to a China Central Depository & Clearing Co. statement. That compares with 3.96 percent in the secondary market Thursday.
— With assistance by Helen Sun