China’s Swap Rate Climbs as PBOC Refrains From Signaling Easing

China’s one-year interest-rate swaps climbed for a second day after a quarterly report from the central bank failed to signal potential policy loosening even as the world’s second-largest economy cools.

The People’s Bank of China reiterated it will keep a “prudent” monetary-policy stance, according to the note published on its website. The monetary authority asked lenders to submit orders for 14- and 28-day repurchase contracts, 14-day reverse repos, and 91-day bills, according to a trader at a primary dealer required to bid at the auctions.

The PBOC’s report “suggests it doesn’t intend to loosen policy significantly,” Zhang Zhiwei, a Hong Kong-based economist at Nomura Holdings Inc., wrote in a research note today. “It implies the government would tolerate a slowdown, or push reforms to boost growth through productivity gains, rather than easing monetary policy.”

The cost of the one-year swap, the fixed payment needed to receive the floating seven-day repurchase rate, rose five basis points, or 0.05 percentage point, to 3.69 percent as of 4:20 p.m. in Shanghai, data compiled by Bloomberg show. The rate declined to 3.61 percent yesterday, the lowest since June.

The seven-day repo rate, a gauge of interbank funding availability, was little changed at 3.11 percent, according to a weighted average compiled by the National Interbank Funding Center. The rate has averaged 3.46 percent so far this quarter, compared with 4.05 percent in the first three months.

The Ministry of Finance sold 28.59 billion yuan ($4.6 billion) of three-year government bonds at 3.9 percent today, according to a statement on the website of the China Central Depository & Clearing Co.

The yield on the 4.42 percent government bonds due March 2024 was unchanged at 4.31 percent, according to data from the National Interbank Funding Center.

— With assistance by Helen Sun

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