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Read the latest issue of The Context, our Financial Intelligence newsletter. The Context contains a selection of thought leadership articles from around the globe, spanning a host of asset classes to give you value-added insight into key themes affecting macroeconomics, markets and fund flows. Click here for The Context pdf. If you have any comments or suggestions, please contact us.

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    China Insight: Bond inflows pick up amid weak economy

    27 Mar 2020

    China Insight: Bond inflows pick up amid weak economy

  • IGM Credit, IGM FX and Rates

    The Context 03.23.20

    23 Mar 2020

    Read more from The Context and subscribe to have it delivered to your inbox each week!

    Topics Industry News

  • IGM Credit, IGM FX and Rates

    China Insight: What Does Recent IRS Curve Steepening Imply?

    By Tim Cheung 23 Mar 2020

    China's activity growth data for February were much weaker than expected, suggesting there is a very good chance the Q1 GDP y/y will fall into negative territory. Among forecasts from major investment banks, the most pessimistic ones for China's Q1 growth y/y are now in the -7/-9% range instead of +2/+3% territory seen a month ago, while that for the 2020 full-year growth are in the +1/+3% area rather than +4/+5%. To avoid the economy worsening further in the aftermath of the COVID-19 outbreak, Beijing inevitably has to ramp up fiscal spending substantially over the rest of the year. Given the postponement of the National People’s Congress (NPC) meeting which was initially scheduled for early March, we so far have no official data on how much the government will spend in 2020. However, with the onshore CNY IRS curve steepening sharply recently (chart 1), we doubt the potential increase in government expenditure will be small. Meanwhile, we reckon most (if not all) of the extra spending will be financed by the issuance of special bonds, in particular, the long-term ones. As per chart 2, special bond issuance increased substantially in Jan and Feb, which may be setting a trend for most of the year.      

    Topics Industry News

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