Chinese 10-year bond yields rises modestly after firm Chinese data

The Chinese 10-year bonds yield is modestly firmer on Friday after reading better Chinese economic data. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved higher 0.34 pct to 2.957 pct and the yield on the 2-year bond rose 0.29 pct to 2.438 pct by 0650 GMT.

China’s Q1 GDP rose to 6.7 pct y/y, trending in the line of market expectation (6.7 pct y/y), as compared to 6.8 pct in the previous quarter. Individually, growth in primary, secondary and tertiary sector slowed down to 2.9 pct y/y, 5.8 pct y/y and 7.6 pct y/y, from 3.9 pct y/y, 6.0 pct y/y and 8.3 pct y/y, respectively. Moreover, March Industrial production figures jumped to 6.8 pct y/y, higher than the market consensus of 5.9 pct y/y, as compared to 5.4 pct in the February. The March retail sales also climbed 10.5 pct y/y, more than the market expectation of 10.4 pct y/y, from 10.2 pct in February.

“Due to these rebalancing dynamics, we expect Chinese output expansion to slow to 6.4pct this year and 6.2 pct in 2017 from 6.9 pct last year”, added Scotiabank.

Meanwhile, the Chinese economy is likely to be underpinned by monetary stimulus this year. The People’s bank of China loosened its policy in early March by lowering the reserve requirement ratio by 50bps to keep liquidity in the banking system and underpin credit growth and money supply.

“We expect further monetary accommodation to be implemented in the near term, particularly in the form of targeted policy measures, such as open market operations”, noted Scotiabank.

Boosted by the Chinese economic data, the Shanghai Composite Index leaped 0.13 pct at 3,086.45 by 0657 GMT.