Bloomberg News

China Rate Swaps Decline for 6th Week on Signs Economy Slowing

October 14, 2011

Oct. 14 (Bloomberg) -- China’s interest-rate swaps fell for a sixth week, the longest stretch of declines since 2008, on speculation a slowing economy will prompt policy makers to halt monetary tightening.

Consumer prices rose 6.1 percent in September from a year ago after climbing 6.2 percent in August, the National Bureau of Statistics said today. That followed data yesterday that showed exports grew 17 percent last month, the least since February. China hasn’t raised borrowing costs since the end of July, and the eastern city of Wenzhou set up a 500 million yuan ($78.4 million) fund to offer loans to small companies in the city, news portal Zhejiang Online reported.

“We haven’t seen tightening in the last two months, which I think is quite positive,” said Matt Huang, a Singapore-based strategist at Macquarie Group Ltd. “You are hearing news now of some easing, such as loans to smaller firms, but not on a big scale.”

The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, decreased 28 basis points, or 0.28 percentage point this week, to 3.45 percent. The rate fell seven basis points today.

The Wenzhou State Council unveiled measures yesterday including offering tax breaks and easier access to bank loans to help small firms after the collapse of some manufacturers in the city.

The seven-day repurchase rate, a gauge of funding availability in the financial system, fell 188 basis points this week to 3.14 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center. The rate rose one basis point today.

The People’s Bank of China withdrew 9 billion yuan in the week through yesterday after having pumped funds into the system for 11 straight weeks.

--Editors: Ven Ram, Sandy Hendry

To contact Bloomberg News staff for this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net;

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net


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