-
Policy
Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM POLICY: -
EM Policy
EM Policy
Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
LATEST FROM EM POLICY: -
G10 Markets
G10 Markets
Real-time insight on key fixed income and fx markets.
Launch MNI PodcastsFixed IncomeFI Markets AnalysisCentral Bank PreviewsFI PiFixed Income Technical AnalysisUS$ Credit Supply PipelineGilt Week AheadGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance CalendarsEZ/UK Bond Auction CalendarEZ/UK T-bill Auction CalendarUS Treasury Auction CalendarPolitical RiskMNI Political Risk AnalysisMNI Political Risk - US Daily BriefMNI Political Risk - The week AheadElection Previews -
Emerging Markets
Emerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
-
Commodities
Commodities
Real-time insight of oil & gas markets
-
Credit
Credit
Real time insight of credit markets
-
Data
-
Global Macro
Global Macro
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
Global MacroDM Central Bank PreviewsDM Central Bank ReviewsEM Central Bank PreviewsEM Central Bank ReviewsBalance Sheet AnalysisData AnalysisEurozone DataUK DataUS DataAPAC DataInflation InsightEmployment InsightGlobal IssuanceEurozoneUKUSDeep DiveGlobal Issuance Calendars EZ/UK Bond Auction Calendar EZ/UK T-bill Auction Calendar US Treasury Auction Calendar Chart Packs -
About Us
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessMNI China Money Week: Improved Liquidity Fuels Bond Rally
BEIJING (MNI) - Improved liquidity conditions in the China money markets
have pushed bond yields lower in the last week, as some investors become more
optimistic about the outlook of liquidity. However, longer-term liquidity
concerns remain.
The yield on the 10-year China Government Bond (CGB) and China Development
Bank bonds fell 5 and 8 basis points respectively, from 3.8702% and 4.8946% last
Friday to 3.8201% and 4.8101% on Thursday, back at yields last seen in December.
Increased optimism over liquidity conditions remain the key driver for
lower bond yields. This pick-up in sentiment was helped Monday when the PBOC
injected a net of CNY150 billion into the banking system via its open market
operations despite ample liquidity in the system, contradicting expectations
that the People's Bank of China will actively drain liquidity from the banking
system after the spring holidays.
More optimistic investors expect a change of monetary policy stance, with
last year's tight liquidity position moving to a more neutral stance this. The
optimism is triggered in part by the change of wording in the PBOC's fourth
quarter monetary policy report, with the central bank saying it looks to keep
liquidity conditions "reasonable and stable" from "generally stable" in the
third quarter report.
--TIGHTER REGULATION
With tight regulation set to continue in 2018 -- the widely-anticipated
asset management industry regulations are likely to published soon -- and with
the PBOC likely to hike its open market operations rate this year following rate
hikes by the Federal Reserve, liquidity will likely remain slightly relaxed to
help avoid systemic financial risks. The ample liquidity will help underpin the
domestic bond market.
With the Two Sessions of National People's Congress and Chinese People's
Political Consultative Conference to be held in the early March, liquidity will
likely to remain relaxed as to keep the stability of the financial system in the
short run, providing a healthy environment for bond investors.
However, longer-term liquidity remains questionable.
There are concerns that if liquidity remains relatively stable it will
likely encourage financial institutions to again boost leverage, against the
PBOC's wishes. It will provide a carry margin for investors to borrow short-term
money and hold longer-term assets. Even if liquidity tightens occasionally, the
average cost will likely remain lower than the returns, making leveraging an
attractive strategy for financial institutions.
Despite the recent recovery for bonds, it is too soon to call a market
renaissance. More local government bonds and policy bank bonds will be issued
after the Two Sessions, putting upward pressures on bond yields. New
regulations, likely effective after two Sessions, will cause uncertainties in
the market.
Additionally, banks, the most important buyers of bonds, are lacking
long-term liabilities. The primary market rates of six-month negotiable
certificates of deposit (NCD) issued by city commercial banks rose to 5.10% on
Wednesday, the highest since the end of January, shows banks' appetites for
longer-term liabilities. The lack of stable long-term liabilities will restrict
banks' capabilities to invest in bonds.
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MK$$$$,MX$$$$,M$$FI$,MN$FI$,MN$MM$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.