China’s interest-rate swaps fell, snapping a five-day advance, on speculation policy makers will refrain from further monetary tightening as the economy cools.
The Purchasing Managers’ Index, a gauge of manufacturing, was 50.9 in August, the China Federation of Logistics and Purchasing said in a statement today, with readings above 50 signaling expansion. That missed the median forecast of economists in a Bloomberg survey for 51. The People’s Bank of China may cut reserve-requirement ratios for small- and medium- sized banks to support lending to smaller companies, the Economic Observer reported today, citing unidentified analysts.
The one-year swap rate, the fixed cost to receive the seven-day repurchase rate, declined 15 basis points, or 0.15 percentage point, to 4.32 percent as of 4:19 p.m. in Shanghai. The rate rose for a fifth month in August, touching a record 4.52 percent this week.
“The PMI came in slightly weaker than expected and the expected seasonal rebound did not really happen,” said Ju Wang, a Singapore-based fixed-income strategist at Barclays Capital. “Our view is that tightening has seen the peak.”
The central bank raised its benchmark interest rates five times in the past year and boosted lenders’ reserve-requirement ratios on nine occasions. Swaps advanced this week after policy makers broadened the scope of reserve requirements to include customers’ margin deposits. The monetary authority injected funds into the financial markets for a sixth straight week, adding a net 16 billion yuan ($2.5 billion) in the past week.
The seven-day repo rate, a gauge of funding availability in the financial system, fell 19 basis points to 4.75 percent in Shanghai, according to a weighted average compiled by the National Interbank Funding Center.
To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net
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