The middle of China's bond yield curve rose sharply on Monday after China Development Bank auctioned bonds at a yield above forecasts. Money market rates were narrowly mixed as repo rates edged down.
China Development Bank, one of three state policy banks which lend to promote government initiatives, auctioned 20 billion yuan ($2.6 billion) of five-year bonds at 4.00 percent, above market expectations of around 3.95 percent. In addition, the bid-to-cover ratio was poor at 1.22 times, showing considerable nervousness in the market before Tuesday's release of May consumer price inflation data.
The auction result boosted the indicative yield on five-year financial bonds issued by policy banks in the secondary market to 3.8827 percent bid on Monday, its highest level for over two years, from 3.8480 percent on Friday, according to Reuters Reference Rates. In response, the five-year government bond yield rose sharply to an indicative 3.5664 percent bid, its highest level for over two years, from 3.5182 percent on Friday.