Chinese bill and bond yields fell on Friday after a strong auction of nine-month bills by the financing ministry amid ample money market liquidity. The ministry sold 10 billion yuan ($1.5 billion) of the bills at an average yield of 1.8843 percent, in line with market expectations and sharply down from an average yield of 2.05 percent for bills of that tenor sold on June 11.
The result follows a series of other bond sales by the ministry and policy banks this week, which also produced yields in line with market forecasts, showing liquidity was ample enough to easily absorb the unusually hefty supply of bonds. In response, the indicative five-year government bond yield eased to 2.6495 percent bid on Friday from 2.6525 percent on Thursday, according to Reuters Reference Rates. The yield had climbed 10 basis points in 11 days through Wednesday.
The market has now largely factored in expectations for July's annual consumer prices - due to be released on August 11 - to rise to 3.0-3.5 percent from June's 2.9 percent. In its monetary policy report for the second quarter published late on Thursday, the People's Bank of China (PBOC) said China would maintain an appropriately loose monetary policy.
In the bills market, the curve flattened as investors avoided buying at the short-end of the curve on the belief the PBOC would continue keeping a neutral to slightly tight liquidity stance in its open market operations. A total of 386 billion yuan in central bank bills and repos are due to mature in August, sharply down from 748 billion yuan in July, limiting the amount of fund injections the PBOC can make to the banking system if it chooses to do so.
The 90-day central bank bill yield in the secondary market rose to 1.7780 percent bid on Friday from 1.7770 percent on Thursday but the three-year yield eased to 2.6670 percent from 2.6730 percent. The weighted average seven-day repo rate edged down to 1.6955 percent by midday from 1.6977 percent on Thursday.
Comments
Comments are closed.