The mainland's one-year interest-rate swap fell to the lowest level in over a month on speculation its central bank will seek to bring down funding costs to stem slowing economic growth and curb the risk of defaults. The cost of one-year swaps, the fixed payment for receiving the floating seven-day repurchase rate, fell five basis points, or 0.05 of a percentage point, to 4.78 per cent in Shanghai yesterday morning. The rate had earlier touched 4.765, the least since December 16, after retreating 32 basis points last week. The People's Bank of China added a net 375 billion yuan (HK$481 billion) into the banking system last week, the most since the period before the Lunar New Year last February, when it pumped in 662 billion yuan. The mainland's financial markets will be shut from Friday to February 6 for this year's Lunar New Year holidays. The injection came as a preliminary reading of the purchasing managers' index indicated manufacturing shrank for the first time in six months this month, and a three billion yuan trust product edged towards the brink of default, the first of its kind in at least a decade. "As the economy looks to be slowing down, interest rates are leading to financial difficulties for companies," Xue Hexiang and Wang Jin, Shanghai-based analysts at Guotai Junan Securities, wrote in a note. "The injection should just be a prelude for loosening. It's not just tactical." The yield on government bonds due in August 2023 fell one basis point to 4.49 per cent, according to the Interbank Funding Centre. That was the lowest level since December 4. The seven-day repurchase rate, a gauge of interbank funding availability, dropped 19 basis points to 4.65 per cent, according to a weighted average by the National Interbank Funding Centre.