China Swap Rate Rises Most in 10 Weeks as Loosening Bets Pared

China’s interest-rate swaps rose the most in 10 weeks on speculation economic data that beat estimates reduces the chance of a cut in borrowing costs.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, increased seven basis points, the most since Aug. 12, to 3.11 percent as of 4:27 p.m. in Shanghai, data compiled by Bloomberg show. The rate fell to a two-year low of 2.96 percent yesterday before the release of the economic growth and industrial production reports.

Premier Li Keqiang, who has said several times this year that slower expansion is tolerable as long as enough jobs are created, said employment gauges were better than expected in the first three quarters, according to a statement yesterday. The People’s Bank of China has injected 250 billion yuan ($41 billion) to 300 billion yuan into 11 lenders, Caixin.com reported yesterday, citing unidentified banking executives.

“Yesterday’s data are mostly better than expected, prompting market speculation that there’s no need for further stimulus,” said Liu Wenbo, an analyst at Shanghai Cifco Futures Co. in the city. “As rates have fallen so much recently, further downside may be limited.”

China said its economy expanded 7.3 percent in the third quarter from a year earlier, compared with 7.5 percent in the previous three months, although more than the 7.2 percent median estimate in a Bloomberg survey. Industrial output rose 8 percent in September, compared with 7.5 percent projected in a separate survey.

Bonds Drop

The probability of system-wide reductions in banks’ reserve-requirement ratios and interest rates is low, Goldman Sachs Group Inc.’s Hong Kong-based analysts MK Tang and Maggie Wei wrote in a research note yesterday.

The Ministry of Finance sold 28.18 billion yuan of seven-year bonds at 3.7 percent today, according to a China Central Depository & Clearing Co. statement. That compared with the 3.66 percent median estimate in a Bloomberg survey.

Sovereign notes declined, with the yield on debt due September 2024 rising four basis points, or 0.04 percentage point, to 3.84 percent, according to the National Interbank Funding Center.

The seven-day repo rate, a gauge of interbank funding availability, rose three basis points to 2.98 percent, a weighted average compiled by the National Interbank Funding Center shows.

— With assistance by Helen Sun

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