The Chinese bonds were trading modestly firmer on Wednesday as investors await for Federal Reserve’s monetary policy meeting. Also, weak consumer sentiments drove investors to safe assets. The yield on the benchmark 10-year bonds which moves inversely to its price moved higher 0.37 pct to 2.973 pct and the yield on the 2-year bonds ticked up 1.38 pct to 0.032 pct by 0530 GMT.
The China’s Westpac-MNI consumer sentiment fell to 117.8 in April from 118.1 in March. Today, the U.S. Federal Reserve will announce its policy decision at 1800 GMT; markets largely expect that interest rates will be kept steady with a slim possibility of a surprise hike. Moreover, focus will be on the press statement and whether there is a shift across the Fed members to a more hawkish stance. Even subtle changes in the wording of its statement will tell us a lot about the probability of a June hike. Recent comments have been far more hawkish than the market is currently pricing in on rates.
On the other hand, China's industrial profits rose by 7.4 pct y/y in March after 4.8 pct y/y in February. The People’s Bank of China is expected to begin easing policy less aggressively after property prices grew sharply and loan growth accelerated strongly in Q1, noted ANZ. Also, this is consistent with the assessment that recent economic data improved a bit – March Industrial production figures jumped to 6.8 pct y/y, higher than the market consensus of 5.9 pct y/y, as compared to 5.4 pct in the February. The March retail sales also climbed 10.5 pct y/y, more than the market expectation of 10.4 pct y/y, from 10.2 pct in February, manifested that Chinese economy is removing modestly.
“Monetary policy has already done its job after last year’s intensive easing and we expects rates on hold all year versus earlier predicting a second-quarter cut,” said Harrison Hu, chief Greater China economist at Royal Bank of Scotland Plc in Singapore to Bloomberg.
“The central bank needs to save the bullets for more difficult times ahead. Fiscal policy should take over and play a larger role this year in buttressing the real economy,” he added.
Meanwhile, Shanghai Composite (SSEC) fell 0.10 pct to 2961 and Shenzhen Composite (SZSE) Index dipped 0.05 pct at 10,205.08 by 0605 GMT.
The material has been provided by InstaForex Company – www.instaforex.com