Chinese financial stress indicators have eased - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, points out that Chinese money market rates have eased in recent weeks to around the lows since April as the yields on Negotiable Certificates of Deposits, often used by smaller banks for funding, have eased significantly from a peak in mid-June. 

Key Quotes

“Interbank lending rates have also eased from June highs.  Some of the decline reflects the end of a seasonally tight funding near the end of half-year.”

“High yield corporate bond yields are at a low since April. Higher grade and Chinese government bond yields have been relatively stable in June, unaffected much by a rise in global yields.  As such, the spreads to lower grade/higher yielding bond has narrowed in recent weeks.”

“The mainland Chinese equity market has been relatively strong in the last month.”

“Implied volatility for CNH is trading around the lows since the surprise mid-2015 CNY devaluation, consistent with relatively low volatility in global markets more generally.”

“While Chinese activity indicators have shown mixed results in recent months, Chinese iron ore, steel, and coal futures have been recovering in recent weeks.”