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China Interest-Rate Swaps Fall as Bill Yield Unchanged at Sale

April 27, 2010, 5:41 AM EDT

April 27 (Bloomberg) -- China’s interest-rate swaps fell as the central bank kept one-year bill yields unchanged for a 13th sale, adding to speculation it won’t raise borrowing costs to cool the economy.

Policy makers have sought to curb property investment by requiring developers to submit fund-raising plans for review. The central bank lowered its benchmark one-year lending and deposit rates by 27 basis points to 5.31 percent and 2.25 percent, respectively, in December 2008 and has kept them there since. Yuan forwards traded near a three-month high.

“The central bank should be able to mop up liquidity without pushing up yields, suggesting there is no imminent need for a policy rate hike,” said Frances Cheung, a Hong Kong-based senior rates strategist at Credit Agricole CIB. “Authorities appear to be focusing on specific sectors to address the problems of liquidity and asset-price inflation.”

The one-year onshore swap rate declined two basis points to 2.11 percent as of 5:08 p.m. in Hong Kong, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

The People’s Bank of China sold one-year bills at a yield of 1.9264 percent, according to traders at Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. The monetary authority offered 75 billion yuan ($11 billion) of the securities.

The China Securities Regulatory Commission has sent financing requests from 41 companies to the Ministry of Land and Resources for reviews of land-use compliance, according to a statement posted on a government Web site on April 24.

Twelve-month non-deliverable forwards were at 6.6131 per dollar, little changed from 6.6096 yesterday, according to data compiled by Bloomberg. The contracts touched 6.593 on April 22, the strongest level since Jan. 11. The yuan was little changed at 6.8262 in the spot market.

--Editors: Sandy Hendry, Ven Ram

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To contact the reporters on this story: Bob Chen in Hong Kong at bchen45@bloomberg.net; Jianguo Jiang in Shanghai at jjiang@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net.

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