China’s Swap Rate Drops Near 13-Month Low Amid PBOC Easing BetsKyoungwha Kim
China’s benchmark interest-rate swap declined toward a 13-month low on speculation policy makers will step up monetary easing after the nation’s manufacturing gauge underscored a deeper slowdown in Asia’s biggest economy.
The government’s Purchasing Managers’ Index was at 50.8 in October, trailing the 51.2 median estimate of analysts in a Bloomberg News survey, and lower than 51.1 in the previous month. Readings above 50 indicate expansion. Growth slowed from September for output, new orders, new export orders, stockpiles and expectations, according to the statement released Nov. 1.
The cost of one-year swaps, the fixed payment to receive the floating seven-day repo rate, dropped two basis points to 3.08 percent, according to data compiled by Bloomberg. It fell to as low as 3.04 percent, approaching 2.96 percent reached on Oct. 21, the lowest since September 2012. The seven-day repurchase rate, a gauge of interbank funding availability, was little changed at 3.26 percent, a weighted average compiled by the National Interbank Funding Center shows.
“PMI outcomes are not encouraging, and there are expectations of more easing from the People’s Bank of China,” said Frances Cheung, Hong Kong-based head of Asian rates strategy at Credit Agricole CIB.
China allowed qualified non-financial institutional investors to trade debt on the interbank bond market, according to a PBOC notice dated Oct. 17 posted on the website of the National Association of Financial Market Institutional Investors. Participants must have net assets of at least 30 million yuan ($4.9 million), according to the statement.
The yield on the 4.13 percent sovereign bonds due September 2024 fell eight basis points to 3.72 percent, according to the National Interbank Funding Center.