China Swap Rate Dips to One-Week Low on PBOC Injection

China’s one-year interest rate swap fell to the lowest level in almost a week as the central bank added funds to the financial system via open-market operations.

The People’s Bank of China issued 10 billion yuan ($1.6 billion) of seven-day reverse-repurchase agreements at 3.9 percent today, according to a statement posted on its website. The monetary authority added a net 41.5 billion yuan to the market in the week ended Aug. 29. Chinese financial markets will be closed on Sept. 19-20 for the mid-Autumn festival and Oct. 1-7 for the National Day holidays.

“The regular reverse-repo operations in recent weeks have helped to stabilize market expectations,” said Xu Hanfei, an analyst at Guotai Junan Securities Co. in Shanghai. “The main risks this month will be in the second half when the public holidays and quarter-end factors will play a role.”

The one-year swap contract, the fixed payment to receive the floating seven-day repo rate, dropped one basis point, or 0.01 percentage point, to 4.14 percent as of 4:42 p.m. in Shanghai, data compiled by Bloomberg show. It touched 4.08 percent earlier, the lowest level since Aug. 28.

The seven-day repurchase rate, a gauge of cash availability in the banking system, lost two basis points to 3.73 percent, according to a weighted average compiled by the National Interbank Funding Center.

China’s official non-manufacturing purchasing managers’ index fell to 53.9 in August from 54.1 in July, the statistics bureau said today. Fifty is the dividing line between contraction and expansion. New local-currency loans in August may be about 780 billion yuan, the Economic Information Daily reported today, citing an unidentified person from the banking industry. That compares with 700 billion yuan in July, government data show.

The yield on the government’s 4.08 percent bonds due August 2023 was unchanged at 4.07 percent, according to the Interbank Funding Center.

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