Bob Savage, director of macromarket strategy at BNY, reports sturdy demand for Chinese bonds sold in Hong Kong, with yields at their lowest in a decade following PBoC liquidity injections ahead of the Lunar New Year. At the same time, China’s CPI and PPI were lower than expected, which deepened the deflationary situation and prompted the authorities to declare a more proactive macroeconomic policy in the face of persistently delicate domestic demand and industrial profits.
Offshore bonds and deflationary pressures
“Debt demand: China sold 14 billion yen of bonds in Hong Kong at a call/cover ratio of 3.94, with yields falling to 2013 lows: 2-year at 1.38%, 3-year at 1.40% and 5-year at 1.57%. China’s Central Bank boosted liquidity ahead of the Lunar New Year, leaving the overnight rate at 1.37%. 7-day rates fell 2 bps to 1.53% after PPI recorded a smaller-than-expected decline of 1.4% YoY, linked to commodity prices, CNY was close to unchanged at 6.91.”
“China consumer inflation rose 0.2% y/y in January, up from 0.8% in December and below market expectations of 0.4%. The producer price index fell 1.4% y/y, extending the long-standing deflationary trend despite a slight easing compared to the previous month.”
“The authorities committed to more proactive macroeconomic policies as persistent supply and demand imbalances and weak domestic demand continue to weigh on price pressures and industry profits.”
(This article was created with the facilitate of an artificial intelligence tool and has been reviewed by an editor.)
