China Swap Rate Gains to One-Week High After Stronger Trade Data

China’s one-year interest-rate swaps climbed to the highest in more than a week after export data damped investors’ expectations of further monetary easing.

Overseas shipments gained 7 percent in May from a year earlier, the customs department said yesterday, compared with the median forecast for an increase of 6.7 percent in a Bloomberg survey of analysts. Imports fell 1.6 percent and the trade surplus widened to $35.92 billion from $18.45 billion a month earlier. Trade will make a positive contribution to second-quarter growth, according to Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.

The cost of one-year swaps, the fixed payment needed to receive the floating seven-day repurchase rate, rose three basis points, or 0.03 percentage point, to 3.49 percent as of 4:25 p.m. in Shanghai, according to data compiled by Bloomberg. The rate touched 3.53 percent earlier, the highest since May 29.

“As data start to suggest stabilizing growth, a large-scale loosening is unlikely,” analysts at Guotai Junan Securities Co. led by Shanghai-based Xu Hanfei wrote in a note today. “Monetary policy will continue to aim at increasing financial institutions’ risk preference, so investors shouldn’t be too optimistic about liquidity or too pessimistic about economic growth.”

China’s banking regulator said June 6 it will encourage lending to some sectors and adjust the way the loan-to-deposit ratio is calculated to give banks room to expand credit.

The seven-day repo rate, a gauge of interbank funding availability, fell two basis points to 3.13 percent, according to a weighted average from the National Interbank Funding Center.

Bond Yield

The People’s Bank of China asked lenders to submit orders for 14- and 28-day repurchase agreements, seven- and 14-day reverse repos, and 91-day bills for this week, according to a trader at a primary dealer required to bid at the auctions.

Premier Li Keqiang said he was worried about the implementation of economic policies in a meeting with leaders of Hebei, Shanxi, Heilongjiang, Jiangsu, Zhejiang, Guangdong and Sichuan provinces and the city of Beijing on June 6, according to a statement posted on the central govenrment’s website. Premier Li urged the provincial heads to make sure they achieve the economic development goals, according to the statement.

The yield on the 4.42 percent government bonds due March 2024 rose one basis point to 4.11 percent, data from the National Interbank Funding Center showed.

— With assistance by Helen Sun

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