China swap rate rises to one-week high as growth stabilizing

[SHANGHAI] China's interest-rate swaps climbed to the highest level in more than a week as better-than-expected economic data damped speculation the central bank will roll out more monetary stimulus to support growth.

Industrial production rose in November by the most since June and retail sales recorded the biggest gain of the year, according to reports released over the weekend, and Friday data showed the broadest measure of new credit more than doubled from October. A Bloomberg monthly China gross domestic product tracker advanced to 6.85 per cent, the best reading since June.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, climbed two basis points to 2.33 per cent as of 4.54 pm in Shanghai, data compiled by Bloomberg show. It earlier rose to 2.34 per cent, the highest since Dec 3.

"The data came out fairly good, damping expectations of further loosening, such as reserve-ratio cuts," said Wei Taiyuan, an investment manager at China Merchants Bank Co in Shanghai. "Also, there's already ample liquidity in the financial system." The yield on sovereign debt due October 2025 increased for the first time in three days, adding four basis points to 3.04 per cent, National Interbank Funding Center prices show. The benchmark 10-year yield fell to 2.99 per cent on Friday, the lowest since October, according to ChinaBond data.

Ten companies' initial public offerings will lock up more than 3 trillion yuan (US$464 million) on Monday, according to a CFETS-ICAP International Money Broking Co estimate. The overnight repurchase rate on the Shanghai Stock Exchange jumped 148 basis points to 3.69 per cent, while the similar-term contract in the interbank market rose one basis point to 1.78 per cent.

BLOOMBERG