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China’s interest-rate swaps snapped a four-day decline to rise the most in more than two weeks after the government announced plans to boost infrastructure spending and Europe stepped up efforts to tackle its debt crisis.
China approved proposals to build 2,018 kilometers (1,254 miles) of roads, its second major construction project unveiled this week, according to statements posted yesterday on the National Development & Reform Commission’s website. European Central Bank President Mario Draghi said yesterday policy makers agreed to an unlimited debt-purchase program to reduce interest rates for struggling euro-area nations and fight speculation of a breakup of the common currency.
“The ECB bond-buying plan means a better global growth outlook,” said Dariusz Kowalczyk, a strategist at Credit Agricole CIB in Hong Kong. “NDRC infrastructure approvals mean the same and liquidity seems tighter after the central bank didn’t sell enough reverse-repurchase contracts this week.”
The one-year swap, the fixed cost to receive the seven-day repurchase rate, climbed eight basis points to 3.10 percent in Shanghai, according to data compiled by Bloomberg. That’s the biggest increase since Aug. 22. It fell three basis points since Aug. 31, the second weekly decline.
The People’s Bank of China conducted 20 billion yuan ($3.2 billion) of seven-day reverse-repurchase agreements yesterday at a yield of 3.35 percent, according to a statement posted on its website. The central bank also injected 20 billion yuan via 14- day contracts at 3.5 percent.
The seven-day repo rate, a gauge of interbank funding availability, dropped to 12 basis points this week and was little changed today at 3.40 percent in Shanghai, a weighted average shows. The yield on 2.91 percent government bonds due April 2015 rose five basis points to 2.94 percent, according to Chinabond data. It was little changed this week.
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