China’s market rates unlikely to rise rapidly in short term: state media By Reuters


SHANGHAI (Reuters) – China’s market interest rates are unlikely to rise rapidly in the short term despite the recent sharp uptick in U.S. bond yields, the state-run China Securities Journal said on Thursday.

Chinese bonds have been “desensitized” to their U.S. counterpart, as economic cycles in the world’s two largest economies diverged, a commentary published on the state media said, adding that domestic rates have also already priced in the impact of macroeconomic policy changes.

The newspaper said that further rises in the market rates in China were contained as two key policy rates – interest rates in open market operations and medium-term lending facility (MLF) – were stable with no signs of them being pushed up in the short term.

Expectations for inflation and the broad economy were stable while supply and demand in the bond market were balanced in the first quarter of this year, it added.

“Macro situations at both home and abroad have been generally improving, and (we should) pay close attention to price trends,” the newspaper said.

“Meanwhile, government bond issuance may accelerate in the second quarter, causing increasing supply pressure, so the upward trend of market interest rates has not yet ended.”

The yield on the benchmark U.S. 10-year Treasury bonds has risen around 60 basis points so far this year, compared to an uptick of 10 basis points for the 10-year Chinese government bonds in the same period, leading to a shrinking in the yield premium.

Earlier this week, Guo Shuqing, head of the China Banking and Insurance Regulatory Commission, said China was studying ways to manage capital inflows to prevent turbulence in the domestic market as the authorities are “very worried” about the risk of bubbles bursting in foreign markets.

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