Bloomberg News

China Swap Has Biggest Decline in Six Months on Growth Concerns

May 11, 2012

China’s one-year interest-rate swap had its biggest weekly decline in six months on speculation the world’s second-biggest economy will slow further.

Industrial production rose 9.3 percent in April from a year earlier, lower than all 32 estimates in a Bloomberg News survey and the smallest increase since May 2009, official data showed today. Consumer prices climbed 3.4 percent after a 3.6 percent gain in March, the National Bureau of Statistics reported.

“Growth concerns are behind today’s slump in the IRS,” said Pin Ru Tan, a rates strategist at HSBC Holdings Plc in Hong Kong. “The liquidity situation has improved significantly this week,” after the central bank injected cash.

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, fell 23 basis points this week to 3.13 percent as of 4:30 p.m. in Shanghai, according to data compiled by Bloomberg. It declined seven basis points, or 0.07 percentage point, today, the biggest drop since March 12.

The People’s Bank of China added 41 billion yuan ($6.5 billion) of capital to the financial system this week, a seventh weekly injection, according to data compiled by Bloomberg.

The seven-day repurchase rate, which measures interbank funding availability, dropped 65 basis points this week to 3.19 percent, according to a weighted average compiled by the National Interbank Funding Center. It fell four basis points today.

The PBOC said it will use a combination of liquidity tools, including reverse-repurchase contracts, repurchase contracts, bills and the reserve requirement, to manage cash supply in the banking system, according to a quarterly report posted on its website yesterday.

China’s new yuan loans were 681.8 billion yuan in April, the least in four months, central bank data showed today. M2 money supply increased 12.8 percent from a year earlier.

The yield on the 3.41 percent government bonds due March 2019 dropped six basis points this week to 3.36 percent and four basis points today, 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.

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


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