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More on China

January 26th, 2010 Michael McDonough

Following up on my comment from early this morning, Uncertainty of Chinese Tightening Continues to Weigh on Asian Markets, I wanted to mention that, surprisingly, the Chinese central bank, during its regularly scheduled Tuesday auction, did not increase the yield on its one-year paper, keeping it constant at 1.9264%. It is widely expected that once this yield reaches 2.25% — the current deposit rate — a Chinese rate hike is inevitable.

This pause may imply that government officials believe a hike in the reserve requirement ratio and other policies have been effective, and investors may be able to take a short breath prior to an eventual Chinese rate hike. The next regularly scheduled auction will be on Thursday.

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