13 Jan 2015
China: Fiscal stimulus to complement targeted easing in 2015 - ING
FXStreet (Barcelona) - The ING Team notes that China plans to issue CNY 1.3 trillion of government bonds to complement the targeted easing in 2015 and further expects bond yields to be well supported forecasting 10-year yields to rise to 3.70% from 3.50% by year-end.
Key Quotes
“The MoF plans to issue CNY 1.3 trillion of government bonds in 2015 according to the issuance plan released last week."
"The roughly CNY 200 billion increase from 2014 seems consistent with recent reports of a pipeline of CNY 7 trillion of infrastructure projects amid the slowdown in property investment growth and weaker spending by local government financing platforms due to consolidation of local government finances and declining revenue from land transfer fees.”
“Similar to what occurred in 2009 when the government deficit widened to 2.7% of GDP from 0.7% in 2008, we expect this year’s government deficit to widen toward 3% of GDP from an estimated 1.4% in 2014."
"We think bond supply and asset allocation to the equity market will support bond yields and we have revised our yearend forecast for the 10-year government bond yield to 3.70% from 3.50% (latest 3.64%, Bloomberg consensus 3.61%).”
Key Quotes
“The MoF plans to issue CNY 1.3 trillion of government bonds in 2015 according to the issuance plan released last week."
"The roughly CNY 200 billion increase from 2014 seems consistent with recent reports of a pipeline of CNY 7 trillion of infrastructure projects amid the slowdown in property investment growth and weaker spending by local government financing platforms due to consolidation of local government finances and declining revenue from land transfer fees.”
“Similar to what occurred in 2009 when the government deficit widened to 2.7% of GDP from 0.7% in 2008, we expect this year’s government deficit to widen toward 3% of GDP from an estimated 1.4% in 2014."
"We think bond supply and asset allocation to the equity market will support bond yields and we have revised our yearend forecast for the 10-year government bond yield to 3.70% from 3.50% (latest 3.64%, Bloomberg consensus 3.61%).”