China Swap Rate Climbs a Third Day as Flash PMI Beats Estimates

China’s interest-rate swaps rose for a third day as manufacturing data that beat estimates added to speculation authorities won’t need to implement major stimulus.

A preliminary Purchasing Managers’ Index for October released today by HSBC Holdings Plc and Markit Economics was 50.4, exceeding the median estimate of 50.2 in a Bloomberg News survey and matching September’s final reading. That followed official reports on Oct. 21 showing third-quarter economic growth and industrial production in September were higher than analysts’ expectations.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, rose one basis point to 3.11 percent as of 4:40 p.m. in Shanghai, data compiled by Bloomberg show. The rate has climbed 15 points since touching a two-year low of 2.96 percent on Oct. 21.

“The flash PMI showed a modest pickup, suggesting the growth momentum is stabilizing in China,” said Zhou Hao, a Shanghai-based economist at Australia & New Zealand Banking Group Ltd. “The government will focus more on structural changes. Overall, the fiscal policy will remain proactive, but a big push is unlikely.”

The People’s Bank of China sold 20 billion yuan ($3.3 billion) of 14-day repurchase agreements at 3.4 percent today, according to a statement on its website. That took sales this week to 40 billion yuan, matching the amount of maturing repo contracts and bills, data compiled by Bloomberg show. This is the second consecutive week that the PBOC didn’t inject or drain any funds through open-market operations.

Bonds Drop

Sovereign bonds fell for a third day, with the yield on the notes due September 2024 rising one basis point, or 0.01 percentage point, to 3.85 percent, according to the National Interbank Funding Center.

The seven-day repo rate, a gauge of interbank funding availability, rose eight basis points to 3.06 percent, a weighted average compiled by the National Interbank Funding Center shows. The rate climbed for a second day as lenders park corporate tax payments at the central bank this week, and as initial public offerings today and tomorrow are estimated by Ping An Securities Co. to freeze more than 1 trillion yuan.

— With assistance by Helen Sun

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