HALISTER1: China Bond Market Correction Has Long Way to Go: Huachuang Sec.

China Bond Market Correction Has Long Way to Go: Huachuang Sec.

(Bloomberg) -- It’s not time for optimism on China’s bond market, as it’s clear PBOC aims for gradual deleveraging, Huachuang Securities analyst Qu Qing writes in a note today.
  • Liquidity is still ample because institutional investors have been cutting leveraged positions due to higher cost of short-term funding, since PBOC resumed injection via 14-day reverse repos
    • PBOC will drain excessive funds through OMO to keep liquidity relatively tight to discourage leverage
    • Increasing yuan depreciation pressure will lead to volatility in money market
  • Upcoming data may show improvement in Aug. economic activity; rebounding inflation would lead to further pressure on bond market
    • CPI to bottom out in Aug. and PPI to turn positive in Oct. on rising oil prices
  • NOTE: Yield in 10-yr China govt bond has rebounded 11 bps since Aug. 15
    • Yield of 10-yr govt bond rises 1 bps today to 2.77% today
Related News and Information: First Word scrolling panel: FIRST First Word newswire: NH BFW To contact the reporter on this story: Emma Dai in Hong Kong at edai8@bloomberg.net To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net Patricia Lui
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Source: BFW (Bloomberg First Word)

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Qu Qing (Huachuang Securities Co Ltd)

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