China Swaps Rise Toward One-Week High as Need for Easing Fades

  • November data signaled economic slowdown is stabilizing
  • PBOC sells 10 billion yuan reverse repos, matching amount due

China’s interest-rate swaps rose toward the highest level in more than a week on speculation signs the world’s second-biggest economy is stabilizing will lessen the need for further monetary stimulus.

Bloomberg’s monthly tracker of China’s gross domestic product climbed to 6.85 percent in November, the best reading since June, after retail sales and factory output data beat analysts’ estimates. Government spending surged last month at more than double the pace for revenue, underscoring efforts to revive an economy that expanded in the third quarter by less than 7 percent for the first time since 2009.

One-year swaps, the fixed payment to receive the floating seven-day repurchase rate, advanced two basis points to 2.33 percent as of 4:30 p.m. in Shanghai, data compiled by Bloomberg show. They reached 2.34 percent on Monday, the highest since Dec. 3. The yield on government bonds due in 2025 fell one basis point to 3.03 percent, after rising four basis points on Monday, National Interbank Funding Center prices show.

“With improving data and a lack of further monetary easing such as reserve-ratio cuts, yields are likely to rebound further,” Qu Qing, a Beijing-based analyst at Huachuang Securities Co., wrote in a research note Tuesday. “It’s not necessary to be too pessimistic about next year’s economy.”

The People’s Bank of China auctioned 10 billion yuan ($1.5 billion) of seven-day reverse-repurchase agreements used to add funds to the financial system at a yield of 2.25 percent on Tuesday, the same amount of similar contracts that are maturing.

The seven-day repo rate, a gauge of interbank funding availability, was little changed at 2.34 percent, according to a weighted average from the National Interbank Funding Center.

— With assistance by Helen Sun

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