China Rate Swap Falls to Four-Week Low as PBOC Seen Adding Cash

China’s one-year interest-rate swaps slid to a four-week low on speculation the central bank’s money-market operations will add cash to the financial system.

The People’s Bank of China injected a net 55 billion yuan ($8.9 billion) last week as more repurchase agreements matured than were sold, data compiled by Bloomberg show. That was the first time funds were added since January. The monetary authority gauged demand for 14- and 28-day repos, seven-day and 14-day reverse repos, and 91-day bills today for operations this week as usual, according to a trader at a primary dealer required to bid at the auctions.

The cost of one-year swaps, the fixed payment needed to receive the floating seven-day repurchase rate, fell eight basis points, or 0.08 percentage point, to 4.12 percent as of 4:22 p.m. in Shanghai, according to data compiled by Bloomberg. That is the lowest level since March 17.

“The central bank will probably continue to control the amount of repos being sold this week, so the 226 billion yuan maturing could result in a small injection,” Gao Hui, a Beijing-based analyst at Founder Securities Co., wrote in a note today. “The slowdown is continuing, and pressure from quarterly tax payments probably won’t affect the market until the last 10 days of this month.”

The seven-day repo rate, a gauge of interbank funding availability, fell 22 basis points to 3.52 percent, after climbing 73 basis points last week, according to a weighted average from the National Interbank Funding Center. It touched 3.02 percent, the lowest since April 4.

Premier Li Keqiang called stabilizing the economy a “heavy task,” and said China can’t underestimate difficulties in a visit to Hainan province on April 10-11, the official Xinhua News Agency reported yesterday.

The yield on government bonds due March 2024 was at 4.42 percent, according to prices from the National Interbank Funding Center. The 10-year yield dropped four basis points last week to 4.46 percent, ChinaBond data show.

— With assistance by Helen Sun

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