China Swaps Drop to Lowest Since 2012 on PBOC

China’s interest-rate swaps declined to the lowest level since 2012 on speculation the central bank will restrain borrowing costs amid mounting debt pressure.

China is pushing rates lower to revive growth in an economy expanding at the slowest pace in six years and to lessen the risk posed by a debt buildup. Local governments reported 16 trillion yuan ($2.6 trillion) of liabilities in a review earlier this year, the China News said on its website, citing a Ministry of Finance official it didn’t name. That indicates a 47 percent jump from 10.9 trillion yuan in June 2013.

The cost of one-year swaps, the fixed payment to receive the floating seven-day repurchase rate, fell six basis points, or 0.06 percentage point, to 2.58 percent as of 11:42 a.m. in Shanghai, according to data compiled by Bloomberg. It dropped to 2.57 percent earlier, the lowest level since August 2012.

Bloomberg

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