The Chinese long-term bonds gained on Wednesday after data showed that Westpac consumer sentiments fell in May, boosted investor’s expectation for further PBOC easing. The yield on the benchmark 10-year bonds which moves inversely to its price moved lower 1bp to 2.974 pct and the yield on the 30-year bonds ticked down 2bps to 2.554 pct by 0600 GMT.
China’s Westpac consumer sentiment declined 3.1 percent m/m to 114.2 in May, from 117.8 in April. Moreover, the sub-indicators for personal finances and expectations for personal finances also fell in May, after upbeat readings in February and March, as did people’s assessment of their household finances, and outlook for business conditions. Uncertainty over income led respondents to be more risk-averse, the poll said, with almost 57 percent saying they kept their savings in a bank. With data showing a continuing slowdown in industrial output, consumers tempered their assessment of the business environment, the poll said. The one-year outlook indicator for business conditions dropped 3 points to 115.7, while the five-year outlook lost 0.4 points to 134.1.
In addition, the China recorded headline CPI inflation of 2.3 pct y/y in April, on par with market expectations and unchanged from March. On monthly basis, CPI inflation decelerated 0.2 pct as compared with a decline of 0.4 pct in March. Individually, food prices were up 7.4 pct y/y and dropped 1.4 pct m/m in April, whereas non-food prices climbed 1.1 pct y/y. Moreover, the China’s core inflation was also unchanged from March at 1.5 pct y/y, whereas on month-on-month basis it was 0.2 pct. On the other hand, the China’s producer prices shrank 3.4 pct y/y, and rebounded by 0.7 pct m/m in April. Furthermore, the latest April trade data on Sunday showed that exports declined unexpectedly 1.8 pct y/y, estimates were for zero growth, after increasing by 11.5 pct y/y in March.
“Lower CPI--with inflation below 3 pct and even below 2.5 pct, should allow the PBOC to continue easing and called the rate “good news” for the economy.” said Shen Jianguang economist at Mizuho Securities Asia Ltd. to WSJ.
Meanwhile, Shanghai Composite (SSEC) fell 0.23 pct to 2,815.09 and Shenzhen Composite (SZSE) Index dipped 0.22 pct at 1,080.554 by 0600 GMT.
