Bloomberg News

China Swap Rate Rises as PBOC Keeps One-Year Bill Yield Stable

December 06, 2011

Dec. 6 (Bloomberg) -- China’s interest-rate swaps climbed for the first time in six days after the central bank kept the yield on one-year bills unchanged for a third week, damping speculation for further monetary easing.

The People’s Bank of China drained 100 billion yuan ($15.7 billion) of capital from the financial system via sales of one- year bills and 28-day repurchase contracts. The central bank kept the yield on one-year notes unchanged at 3.4875 percent, according to a trader at a primary dealer required to bid at the auctions.

“The unchanged one-year bill yield shows the central bank may not want to increase traders’ interest-rate cut speculation,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. “The one-year bill usually conveys some policy signal because its term is the same as the benchmark rate.”

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose seven basis points to 2.74 percent as of 11:05 a.m. in Shanghai, according to data compiled by Bloomberg. Yesterday’s closing level of 2.67 percent was the lowest in a year.

A total of 35 billion yuan of central bank bills and repurchase agreements will mature this week, according to Industrial Bank’s Guo.

The seven-day repurchase rate, which measures interbank funding availability, gained 10 basis points to 3.39 percent, according to a weighted average rate compiled by the National Interbank Funding Center.

The yield on the 3.44 percent government bond due June 2016 climbed three basis points to 3.08 percent, according to the Interbank Funding Center. A basis point is 0.01 percentage point.

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

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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