China Swap Traders Flip to Bet on Higher Rates on Growth Rebound

Some analysts argue China swaps rates have risen too high, especially as government bonds yields have remained little changed despite the improving economic data. Photo: Bloomberg

(Bloomberg) — China swaps traders are switching to bets on higher market interest rates as the economy improves, and away from anticipating further monetary stimulus.

Yuan five-year non-deliverable interest-rate swaps climbed to almost 3% this week, the highest since December 2019 — before the global outbreak of the pandemic — and up from as low as 2.38% in October. Swaps are derivatives used to exchange future interest payments and provide a guide for where markets anticipate rates will be when the contracts mature.