China's bill and bond yields mostly rose on Friday in thin trade, buoyed by mounting optimism over the economic outlook, although the market was wary ahead of May data due for release over the next two weeks.
Banks increased their offer quotes, reflecting rising confidence about the recovery fuelled in part by this week's gains in the stock market, but very few trades were actually completed as downbeat comments on the economy from the authorities kept many market players wary. "Trade is thin because the market is in a wait-and-see mode with the approach of next week's economic data," added a trader at a domestic bank in Shanghai.
China International Capital Corp said in a research note on Friday that global capital flows into emerging markets amplified the risk of asset price bubbles in China, which may burst when inflation eventually forces the United States to hike interest rates. But traders doubted the central bank would tighten liquidity in the near term as a means of addressing that risk.
The indicative five-year government bond yield rose to 2.3664 percent bid on Friday from 2.3590 percent on Thursday, according to Reuters Reference Rates. In the bills market, traders sold on speculation that there could be an announcement as soon as this weekend regarding details of a planned restart of initial public equity offers. If no announcement emerges, yields may fall back slightly next week, traders said. The 90-day central bank bill yield edged up to 1.0270 percent bid on Friday from 1.0233 percent on Thursday.
Interest rate swaps eased, however, with the offshore non-deliverable five-year interest rate swap dipping to 2.48 percent bid on Friday from 2.50 percent on Thursday. IRS had been edging up over the past two weeks in response to initial news that authorities planned to resume IPOs after an eight-month suspension. Regulators have so far said only that IPOs could resume any time after a comment period on new draft rules, which ends today.