China Central Bank Told to Get Ahead of Curve by Money Markets

The swap market is telling the People’s Bank of China that its two lending rate reductions in three months aren’t enough to reduce borrowing costs or revive the world’s second-largest economy.

Since last weekend’s cut to benchmark lending and deposit rates, the cost of locking in borrowing costs for one year has risen to 13 basis points above the five-year contract. The gap was 17 basis points Thursday, leaving the swap curve the most inverted since a record cash crunch in June 2013, which Citic Securities Co. says is a signal of both tight money supply and pessimism over economic growth.