China's bond market showed some signs of correction in September after undergoing a sustained rise for three consecutive months. Analysts noted that China's bond market would still hail a long-term bull run in the future.
Though the issuance of special-use bonds and the third batch of local government bonds in September put upward pressure on interest rate-linked products offering, the auction yields of local government bonds have started to edge up, which have a certain appeal to commercial banks, said Xu Hanfei, chief bond analyst with Guotai Junan Securities.
Jiang Chao, chief bond analyst with Haitong Securities, pointed out that market liquidity was expected to remain ample in the future, as the country is still facing huge pressure to stabilize growth, and thus it is necessary to continue implementing relatively loose monetary policies to sustain growth.
As China's foreign exchange reserves fell by a record 93.9 billion US dollars last month to reach 3.56 trillion US dollars at the end of August, the central bank was expected to take multiple measures such as reverse repos, short-term liquidity operations (SLO) and mid-term lending facility (MLF) to pump liquidity into the banking system. Besides, market widely expected that there is still room for the central bank to further cut its reserve requirement ratio (RRR) in the future.
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