China’s benchmark interest-rate swaps rose, snapping a three-day drop, on signs activity in Asia’s largest economy is picking up.
The nation posted a record $49.84 billion trade surplus in August, more than the median estimate for a $40 billion excess in a Bloomberg survey, a report showed on Sept. 8. New yuan loans almost doubled to 700 billion yuan ($114 billion) last month from July, according to a separate Bloomberg survey before data due as early as today.
The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repurchase rate, increased two basis points to 3.63 percent in Shanghai, according to data compiled by Bloomberg. The rate, which declined two basis points over the previous three days, has fallen 159 basis points, or 1.59 percentage points, this year.
“Swaps should be bottoming out as the current levels represent pessimism on the growth outlook,” said Frances Cheung, Hong Kong-based head of Asian rates strategy at Credit Agricole CIB. “The central bank is being supportive of liquidity and growth is likely to be supported by government policies.”
The People’s Bank of China injected funds via open-market operations in each of the last four weeks, data compiled by Bloomberg show. The monetary authority sold 15 billion yuan of 14-day repurchase contracts yesterday.
The PBOC gauged demand for 14- and 28-day repo contracts tomorrow, according to a trader at a primary dealer required to bid at the auctions. The central bank also asked lenders to submit orders for 14-day reverse-repurchase agreements and 91-day bills this morning, the trader said.
The seven-day repo rate, a gauge of funding availability between banks, climbed seven basis points to 3.23 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.
The yield on the 4 percent government bonds due June 2024 rose one basis point to 4.30 percent, according to data from the National Interbank Funding Center.