Chinese sovereign bonds rise modestly following weak exports, imports

The Chinese sovereign bonds gained Monday after data showed that the country’s both exports and imports declined worse than many forecasters had expected in July. The yield on the benchmark 10-year note, which moves inversely to its price, dipped nearly 1 basis point to 2.775 percent, the yield on super-long 30-year bond fell 1-1/2 basis points to 3.355 percent and the yield on short-term 3-year note slid more than 1 basis point to 2.417 percent by 05:00 GMT.

China’s exports fell again in July while a decline in imports accelerated in a possible sign of weakness in the world’s second-largest economy. Imports tumbled 12.5 percent y/y in July in USD terms after falling 8.4 percent y/y in June, against market expectation of -12.5 percent y/y.

Similarly, exports declined 4.4 percent y/y in USD terms after dipping 4.8 percent y/y in June, consensus was for -3.5 percent y/y. China's trade balance widened to 52.31 billion US dollar in July from 48.11 billion US dollar in June, consensus was for 47.3 billion US dollar.

Lastly, markets will remain keen to focus on the upcoming economic data, highlighted by CPI, PPI, industrial production and retail sales. The inflation data on Tuesday will not change the overall picture and we see headline CPI inflation staying at 1.9 percent y/y in July while the consensus is looking for a marginal drop to 1.8 percent y/y while the PPI is likely to continue normalising and we are projecting –2.2 percent y/y in July with the consensus for –2.0 percent y/y after –2.6 percent y/y in June.

Meanwhile, China sets the USD/CNY reference rate at 6.6615, 0.31 percent weaker than 6.6406 last Friday. The Shanghai Composite (SSEC) rose 0.55 percent to 2,993.11.