Bloomberg News

China Swaps Have Biggest Weekly Drop Since ’08 as PBOC Adds Cash

November 04, 2011

Nov. 4 (Bloomberg) -- China’s interest-rate swaps were set for their biggest weekly decline in almost three years after the central bank injected cash into the financial system, adding to signs an easier monetary policy is being pursued.

The People’s Bank of China injected a net 96 billion yuan ($15 billion) of funds into the financial system this week, following two weeks of withdrawals, according to data compiled by Bloomberg. The European central bank yesterday lowered its benchmark interest rate by 25 basis points to 1.25 percent.

“Such a big cash injection has helped ease a cash shortage,” said Huang Yanhong, a bond analyst at Bank of Nanjing Co. in Nanjing. “The rate cut in Europe also improves market sentiment and reinforces domestic monetary-easing speculation.”

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined 38 basis points this week to 3.24 percent as of 10:14 a.m. in Shanghai, according to data compiled by Bloomberg. That was the biggest weekly drop since Nov. 28, 2008. It fell six basis points, or 0.06 percentage point, today.

Media reports from Hong Kong and China that some Chinese banks had their loan quotas increased for November are “most likely true,” Sun Mingchun, the Hong Kong-based head of China Research at Daiwa Capital Markets, wrote in a report dated yesterday.

The seven-day repurchase rate, which measures interbank funding availability, declined 154 basis points this week to 3.50 percent, according to a weighted average rate compiled by the National Interbank Funding Center. It gained 10 basis points today. The yield on the 3.94 percent government bond due January 2021 dropped eight basis points to 3.73 percent this week, according to the Interbank Funding Center. It fell one basis point today.

--Judy Chen. Editors: Andrew Janes, James Regan

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at


To contact the editor responsible for this story: Sandy Hendry at

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