Chinese bill and bond yields fell on Friday after the central bank said it would continue implementing an appropriately loose monetary stance in the second half of this year. Traders think the People's Bank of China (PBOC) will continue to avoid raising benchmark interest rates in the coming months because of increasing concerns about the pace of China's and global economic recovery.
June gross domestic product growth data, due on Thursday, is expected to confirm that China's economy is slowing in response to government steps to cool the property market and curb bank lending, with June export data seen showing signs of a weak recovery in the global economy.
"A weakening economic recovery in China and the United States has become very apparent now, which is positive to the bond market," said an analyst at a major Chinese bank in Shanghai. The indicative 10-year government bond yield fell to 3.2718 percent bid on Friday from 3.2791 percent on Thursday, according to Reuters Reference Rates.
Traders are closely watching if the yield would break below 3.0 percent, which will open the downside. The Shanghai portion attracted about 480 billion yuan ($70.8 billion) in retail and institutional subscriptions, below analysts' previous estimates of at least 1 trillion yuan, suggesting lower-than-expected popularity and easing worries for more big IPOs in the pipeline. The 90-day central bank bill yield in sympathy eased to 2.2073 percent bid on Friday from 2.2500 percent on Thursday.
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