China's bill and bond curve flattened slightly on Monday after forecasts showed a mixed picture for second quarter economic data, suggesting the economic recovery may not be strong enough for a major tightening of monetary policy. Brokerage CLSA said on Monday its purchasing managers' index rose to a nine-month high in April of 50.1 from 44.8 in March, its first time above 50 since July.
That was in line with the official PMI, released on Saturday, which held above the boom-bust line of 50 for the second month in a row, rising to 53.5 in April from 52.4 in March. The State Information Centre said in a report published in the official China Securities Journal that Chinese annual economic growth will rise to 7 percent in the second quarter from the first quarter's 6.1 percent. But the government think-tank also said the consumer price index would show an annual decline of 1.3 percent in the second quarter.
It also pegged industrial output growth at 7.1 percent in the second quarter, down from 8.3 percent in March, while exports were seen falling 20.2 percent against a drop of 17.1 percent in March. The three-year government bond yield edged up to 1.7544 percent bid on Monday from 1.7535 percent on Thursday, according to Reuters Reference Rates. China's financial markets were closed on Friday for a public holiday.
But the five-year government bond yield slipped to 2.4482 percent from 2.4527 percent. In the bills market, most yields edged down because of ample liquidity but traders expected the central bank would remain determined to keep a floor under yields, despite an expected drop in April loan growth from March's record. The one-year central bank bill yield slipped to 1.2299 percent bid on Monday from Thursday's 1.2359 percent but the three-month yield edged up to 1.0370 percent from 1.0290 percent.
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