The Chinese long-term Treasury bonds modestly firmer on Monday as risk sentiment softens among investors after Petroleum Exporting Countries (OPEC) and Russia failed to strike a deal in Doha to freeze crude output. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, moved down 0.03 pct to 2.946 pct and the yield on the 20-year Treasury bond dipped 1.02 pct to 3.300 pct by 0640 GMT.
The negotiations between Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement in the Doha round of talks on Sunday to strike a deal on oil output freeze. On the other hand, Saudi Arabia said that they were ready to freeze the current level of crude oil production on condition that all other producing countries follow the same. The International benchmark Brent futures fell 4.27 pct to $41.25 and West Texas Intermediate (WTI) tumbled 4.73 pct to $38.45 by 0640 GMT.
On Friday, China’s first quarter Gross Domestic Product (GDP) rose to 6.7 pct y/y, trending in the line of market expectation (6.7 pct y/y), as compared to 6.8 pct in the previous quarter. Individually, growth in primary, secondary and tertiary sector slowed down to 2.9 pct y/y, 5.8 pct y/y and 7.6 pct y/y, from 3.9 pct y/y, 6.0 pct y/y and 8.3 pct y/y, respectively. Moreover, 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.
“Due to these rebalancing dynamics, we expect Chinese output expansion to slow to 6.4pct this year and 6.2 pct in 2017 from 6.9 pct last year”, said Scotiabank in its latest report.
Meanwhile, the Chinese economy is likely to be underpinned by monetary stimulus this year. The People’s bank of China loosened its policy in early March by lowering the reserve requirement ratio by 50bps to keep liquidity in the banking system and underpin credit growth and money supply.
“We expect further monetary accommodation to be implemented in the near term, particularly in the form of targeted policy measures, such as open market operations”, noted Scotiabank.
Meanwhile, Shanghai Composite Index fell 1.27 pct at 3,038.75 by 0647 GMT.
The material has been provided by InstaForex Company – www.instaforex.com