China Swaps Near Seven-Week Low on Bets for Pro-Growth Policies

  • GDP beats estimates, although slowest in more than six years
  • September industrial output misses economists' forecasts

Looking at China’s Expanding Economy

China’s one-year interest-rate swaps traded near the lowest level since August on speculation policy makers will continue efforts to boost growth after the economy expanded at the slowest pace since 2009.

Gross domestic product rose 6.9 percent in the three months through September from a year earlier, official data showed Monday. While that beat the 6.8 percent median increase forecast in a Bloomberg survey, it was the weakest since the first three months of 2009. Premier Li Keqiang urged financial companies to keep liquidity at a reasonable level and ensure adequate credit growth during an Oct. 16 meeting with a group of executives, including those from banks and insurance firms.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, was little changed at 2.41 percent at 4:46 p.m. in Shanghai, according to data compiled by Bloomberg. It fell to 2.39 percent on Oct. 14, the lowest level since Aug. 27. The seven-day repo rate, a gauge of interbank funding availability, was steady at 2.37 percent, a weighted average from the National Interbank Funding Center shows.

“Policy makers should use targeted measures to make sure funding costs in the real economy are low enough to boost companies’ borrowing,” said Luo Yunfeng, a fixed-income analyst at Essence Securities Co. in Beijing. “On the other hand, Monday’s data are slightly better than our forecasts, especially the domestic consumption, reducing the chance for any urgent reserve ratio or interest-rate cuts.”

China has lowered borrowing costs five times since November and boosted infrastructure spending in recent months to spur growth. Industrial output increased 5.7 percent in September, below economists’ estimates of 6 percent, while retail sales rose 10.9 percent versus a forecast for a 10.8 percent gain. Fixed-asset investment climbed 10.3 percent in the first nine months from the same period last year, the slowest pace since 2000.

The yield on sovereign bonds due July 2025 declined one basis point to 3.13 percent, according to prices from the National Interbank Funding Center.

— With assistance by Helen Sun

Before it's here, it's on the Bloomberg Terminal.