Offshore Yuan, Swaps Rise as Money Supply Growth Beats Estimates

The offshore yuan traded in Hong Kong advanced as money supply and credit growth that beat estimates improved sentiment and boosted interest-rate swaps.

Aggregate financing was 1.35 trillion yuan ($215.5 billion) in February, the People’s Bank of China said in Beijing Thursday, above the 1 trillion yuan median forecast in a Bloomberg survey. New yuan loans totaled 1.02 trillion yuan and M2 money supply rose 12.5 percent from a year earlier. The nation is likely to remove a deposit-rate ceiling this year, PBOC Governor Zhou Xiaochuan said at a press conference in Beijing Thursday, adding that the yuan is stable compared with other currencies and that its moves are normal.

“Today’s data were surprisingly good, and if the trend continues, the real economy should rebound in a few months,” said Chen Peng, a fixed-income analyst at Fortune Securities Co. in Shenzhen. “Still, we need confirmation from economic activity data to prove credits are filtering through.”

The offshore yuan rose 0.07 percent to 6.2755 a dollar as of 5:05 p.m. in Hong Kong Thursday, according to data compiled by Bloomberg. The rate in Shanghai closed little changed at 6.2624, China Foreign Exchange Trade System prices show.

In the money markets, the fixed payment to receive the floating seven-day repo rate rose three basis points to 3.55 percent, data compiled by Bloomberg show. The seven-day repo rate, a gauge of interbank funding availability, climbed four basis points to 4.71 percent, based on a weighted average from the National Interbank Funding Center.

Bonds Steady

The yield on sovereign bonds due September 2024 was steady at 3.45 percent, according to National Interbank Funding Center prices. It dropped nine basis points on Wednesday, the biggest decline in three months.

Last month’s M2 increase compared with 11 percent estimated by economists and January’s 10.8 percent rise. New local-currency loans compared with the 750 billion yuan median estimate of economists and the originally reported 1.47 trillion yuan for January. China’s economic data in January and February are distorted by a week-long Lunar New Year holiday, which began on Feb. 18 this year.

The PBOC cut its daily reference rate by 0.03 percent to 6.1617 a dollar, the weakest since Sept. 5, after official data Wednesday showed factory production, investment and retail sales growth fell short of estimates in the first two months of the year. The onshore yuan’s gap with the central bank’s daily reference rate was 1.63 percent, the narrowest since Jan. 23 and within the 2 percent limit.

Twelve-month non-deliverable yuan forwards reversed losses to gain 0.12 percent to 6.4099 a dollar, according to data compiled by Bloomberg. The contracts traded 2.3 percent weaker than the spot rate in Shanghai.

— With assistance by Tian Chen, and Fion Li

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