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MNI China Press Digest May 17: RRR, Yield, Local Bonds

MNI (Singapore)
MNI (Beijing)

MNI picks key stories from today's China press

Policy NewsHomepageCentral Bank NewsPBOCAPACChinaStoryBond Market NewsEM Policy NewsEM Policy StoryEM Central Bank NewsPeoples Bank of ChinaPolicy StoryRegion
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Highlights from Chinese press reports on Friday:

  • Authorities could make a RRR cut in Q2 to adjust liquidity and prices in coordination with fiscal plans, according to Wu Chaoming, vice president of the Institute of Finance and Information Technology. However, officials will likely delay lowering interest rates even though economic conditions necessitate further cuts, Wu continued. Zhang Yiqun, a deputy director at the China Fiscal Society, said the government can alleviate fiscal fund pressure and buffer short-term debt repayment issues through issuing ultra-long-term special bonds. (Source: Securities Daily)
  • Supply and demand in the bond market is expected to return to equilibrium following the issuance of ultra-long-term special treasury bonds on Friday, according to the central bank-run newspaper Financial News. Long-term treasury bond yields have risen since end-April, as market confidence in the economic rebound and the bottoming out of low inflation increased, with the yield of the 30-year treasury standing above 2.5% again. The central bank’s treasury trades in future will also help to adjust market supply and demand, and help promote smooth yields, the newspaper said citing an unnamed source. The reasonable range for long-term treasury yields should be 2.5-3%, the newspaper cited a market source as saying. Previously, the hunt for long-term assets by some institutions had pushed the yields below 2.5%.
  • The China Securities Regulatory Commission has stepped up regulations on local bond issuance by asking its local bureaus to report on random inspections of bond business and stationing officers to different provinces for supervision, 21st Century Business Herald reported. Before 2022, bond issuance by local-government financing vehicles had many irregularities, such as using one project to issue bonds twice after “packing” under different names. Authorities will aim to uncover such issues, the newspaper said citing unnamed industry insiders.
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Highlights from Chinese press reports on Friday:

  • Authorities could make a RRR cut in Q2 to adjust liquidity and prices in coordination with fiscal plans, according to Wu Chaoming, vice president of the Institute of Finance and Information Technology. However, officials will likely delay lowering interest rates even though economic conditions necessitate further cuts, Wu continued. Zhang Yiqun, a deputy director at the China Fiscal Society, said the government can alleviate fiscal fund pressure and buffer short-term debt repayment issues through issuing ultra-long-term special bonds. (Source: Securities Daily)
  • Supply and demand in the bond market is expected to return to equilibrium following the issuance of ultra-long-term special treasury bonds on Friday, according to the central bank-run newspaper Financial News. Long-term treasury bond yields have risen since end-April, as market confidence in the economic rebound and the bottoming out of low inflation increased, with the yield of the 30-year treasury standing above 2.5% again. The central bank’s treasury trades in future will also help to adjust market supply and demand, and help promote smooth yields, the newspaper said citing an unnamed source. The reasonable range for long-term treasury yields should be 2.5-3%, the newspaper cited a market source as saying. Previously, the hunt for long-term assets by some institutions had pushed the yields below 2.5%.
  • The China Securities Regulatory Commission has stepped up regulations on local bond issuance by asking its local bureaus to report on random inspections of bond business and stationing officers to different provinces for supervision, 21st Century Business Herald reported. Before 2022, bond issuance by local-government financing vehicles had many irregularities, such as using one project to issue bonds twice after “packing” under different names. Authorities will aim to uncover such issues, the newspaper said citing unnamed industry insiders.