China’s five-year interest-rate swaps rose to a two-week high on speculation an improving U.S. economy will prompt the Federal Reserve to rein in stimulus measures that have spurred fund flows into emerging markets.
The People’s Bank of China today gauged demand for an offering of three-month bills this week, after issuing such securities on May 9 for the first time since 2011, according to a trader required to bid at the auctions. Claims for jobless benefits in the world’s largest economy unexpectedly dropped to the lowest level in more than five years, an official report showed on May 9.
“Yuan interest-rate swaps are higher along with regional rates, driven by concerns over the Fed exiting its stimulus program,” said Wee-Khoon Chong, a Hong Kong-based strategist at Societe Generale SA.
The five-year swap contract, the fixed cost needed to receive the floating seven-day repurchase rate, climbed one basis point to 3.49 percent in Shanghai, according to data compiled by Bloomberg. It touched 3.54 percent earlier, the highest level since April 25. The one-year swap rate was little changed at 3.27 percent.
The central bank asked banks to submit orders for seven-and 14-day reverse repurchase contracts and 28-day repurchase agreements, according to the trader.
The increase in five-year swap rates was pared after data showed China’s fixed-asset investment unexpectedly decelerated last month and industrial output trailed estimates.
Fixed-asset investment excluding rural households in the first four months of the year increased 20.6 percent, the National Bureau of Statistics said today in Beijing, compared with 20.9 percent in the first quarter. Production grew 9.3 percent in April from a year earlier, compared with the 9.4 percent estimate in a Bloomberg survey of economists.
The seven-day repurchase rate, which measures interbank funding availability, dropped seven basis points, or 0.07 percentage point, to 2.90 percent, according to a weighted average rate compiled by the National Interbank Funding Center.
The yield on 3.52 percent government bonds due February, 2023 was little changed at 3.43 percent, according to National Interbank Funding Center data.
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