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Interest rate hopes add thrust to credits liftoff

(ATF) Investors reaped higher returns on China credits for a tenth straight day Tuesday as data suggested the central bank would keep a lid on interest rates. 

The ATF China Bond 50 powered to its longest winning streak since early March after reports showed that credit growth is slowing, giving the People’s Bank of China more room to keep interest rates unchanged despite climbing inflation. 

The ATF CB50 rose 0.02% to 106.91. The returns-focused measure of 50 most liquid AAA corporate and local government bonds, has gained 0.29% this month, reversing three consecutive months of declines, as the nation’s economic outlook continued to strengthen.

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With the crisis easing, local governments are reducing their borrowing. Total social financing slowed to 11.6% YoY in April from 13.6% last year, wrote Bank of Singapore chief economist Mansoor Mohi-uddin. 

“China’s V-shaped recovery is starting to put upward pressure on inflation,” Mohi-uddin wrote. “In April, producer prices increased . Consumer prices also rose, though at 0.9% YoY headline inflation remains tame, enabling the People’s Bank of China to refrain from raising interest rates despite the economy’s rebound. 

“The central bank may also keep interest rates unchanged this year as credit growth is slowing.”

Mark McCord

Mark McCord is a financial journalist with more than three decades experience writing and editing at global news wires including Bloomberg and AFP, as well as daily newspapers in Hong Kong, Sydney and Melbourne. He has covered some of the biggest breaking news events in recent years including the Enron scandal, the New York terrorist attacks and the Iraq War. He is based in the UK. You can tweet to Mark at @MarkMcC64371550.


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