Bloomberg News

China One-Year Swap Rate Climbs as Bill Redemptions May Decline

December 12, 2011

Dec. 12 (Bloomberg) -- China’s interest-rate swap rate climbed on speculation declining bill redemptions will curb money supply this week.

China will maintain a “prudent” monetary policy and a “proactive” fiscal policy next year, the official Xinhua News Agency reported on Dec. 9, citing a meeting of the Communist Party’s Politburo chaired by President Hu Jintao. A total of 13 billion yuan ($2 billion) of central bank bills and repurchase contracts will mature this week, down from 35 billion yuan last week, according to China Merchants Bank Co.

“Given such a small amount of redemptions, it is possible the central bank may conduct the second week of net liquidity withdrawals,” said Pin Ru Tan, a strategist at HSBC Holdings Plc in Hong Kong.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, rose five basis points to 2.81 percent as of 10:07 a.m. in Shanghai, according to data compiled by Bloomberg.

Consumer prices climbed 4.2 percent in November, the least in 14 months, the statistics bureau said on Dec. 9. Inflation was at 5.5 percent in October.

The seven-day repurchase rate, which measures interbank funding availability, gained three basis points to 3.55 percent, according to a weighted average rate compiled by the National Interbank Funding Center.

The yield on the 2.77 percent government bond due May 2012 rose one basis point, or 0.01 percentage point, to 2.58 percent, according to the Interbank Funding Center.

--Judy Chen. Editors: Andrew Janes, Simon Harvey

To contact Bloomberg News staff for this story: Judy Chen in Shanghai at xchen45@bloomberg.net.

%CNY

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


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