Bloomberg News

China One-Year Swap Rate Touches 1-Month Low as Inflation Eases

July 09, 2012

China’s one-year interest-rate swap rate touched the lowest level in almost a month on speculation easing inflation will give the central bank more room to relax monetary policy.

Consumer prices climbed 2.2 percent in June from a year earlier, the least in 29 months, the statistics bureau said today. China’s central bank gauged demand for seven- and 14-day reverse-repurchase contract sales this week, according to a trader required to bid at the auctions.

“The CPI may trend lower every month till October,” said Guo Caomin, a bond analyst at Industrial Bank Co. in Shanghai. “The central bank may cut the reserve ratio this month if June’s lending is less than 800 billion yuan ($126 billion).”

The one-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, declined two basis points to 2.45 percent as of 4:47 p.m. in Shanghai, according to data compiled by Bloomberg. It touched 2.42 percent, the lowest level since June 11.

The seven-day repurchase rate, which measures interbank funding availability, dropped 13 basis points to 3.36 percent, according to a weighted average rate compiled by the National Interbank Funding Center.

The yield on the 3.51 percent government bond due February 2022 fell three basis points, or 0.03 percentage point, to 3.25 percent, according to the Interbank Funding Center.

China’s finance ministry sold 23.9 billion yuan of three- year bonds today at a yield of 2.75 percent on behalf of local governments, according to a statement on Chinabond. The securities were issued on behalf of Beijing, Shanxi, Heilongjiang, Jiangsu, Fujian, Ningxia and Qinghai.

--Judy Chen. Editors: Sandy Hendry, Andrew Janes

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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