The Chinese sovereign bonds gained Tuesday after Standard & Poor's downgraded the United Kingdom's credit rating. The yield on the benchmark 10-year bonds which moves inversely to its price dipped more than 4 basis points to 2.862 percent.
The S&P announced that it has cut the UK’s sovereign credit rating to AA, from previous from AAA. According to S&P, the outcome of the UK’s EU referendum will lead to less predictable, stable, and effective policy framework in the UK.
The S&P, an American financial services company also added that they have reassessed their view of the UK's institutional assessment and now no longer consider it strength in their assessment of the rating.
Moreover, Chinese GDP is expected to grow less than previously forecast. Nomura’s China economics team lowered its GDP growth forecast from 6.2 percent to 6 percent due to weakening external demand from the E.U. for Made in China, and capital inflows likely to dry up somewhat in a risk-off environment. Also, China's Q216 GDP growth is projected at about 6.7 percent, while inflation is seen coming in at 2.0 percent in Q216, reports Beijing News citing a report by the CASS.
On Monday, China's industrial profits rose by 3.7 percent y/y in May, slowing from April's pace and adding to concerns that the world's second-largest economy may be losing some momentum, from 4.2 percent y/y growth in April.
Lastly, China’s Permier Li said that the China will implement prudent monetary policy in a flexible way; there is room for authorities to implement proactive fiscal policy.
Meanwhile, China sets the USD/CNY reference rate at 6.6528, 0.23% weaker than 6.6375 yesterday, and the lowest level since December 2010. The Shanghai Composite (SSEC) rose 0.37 percent to 2,906.37.
The material has been provided by InstaForex Company – www.instaforex.com