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 five basis points to 3.53 percent as of 10:30 a.m. in Shanghai, according to data compiled by Bloomberg. That’s the highest level since April 26 and the biggest increase since May 6. The one-year swap rate increased one basis point to 3.28 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 seven-day repurchase rate, which measures interbank funding availability, dropped three basis points to 2.94 percent, according to a weighted average rate compiled by the National Interbank Funding Center.
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