HALISTER1: China’s CPI Slowdown May Pressure Bonds Yield in Near Term: ANZ

China’s CPI Slowdown May Pressure Bonds Yield in Near Term: ANZ

(Bloomberg) -- China bonds yield may face downward pressure on knee-jerk reaction to latest CPI reading which is well below estimates, David Qu, Shanghai-based markets economist at ANZ says.
  • China Aug. CPI rises 1.3% y/y, est. 1.7% gain; July 1.8%
    • PPI in the same period contracted 0.8% y/y vs. est. -0.9%; July at -1.7%
  • Still, PPI may be better gauge as it reflects profitability in industrial sectors
    • Shallower drop in PPI also partly due to rising commodity prices
  • Below-ests. CPI could be due to food prices, and base effect
  • NOTE: China food CPI grew 1.3% last month, slowest since Jan. 2015
    • CPI in same month last year grew 2% y/y, pace is fastest in 2015
  • Yield on 2.90% govt bond due May 2026 little changed at 2.805%
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Source: BFW (Bloomberg First Word)

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David Qu (Australia & New Zealand Bank China Co Ltd)

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