China’s latest 1-year bond auction failed to attract sufficient bids, reports the website Chinabond via Bloomberg.
While government intended to sell 28 billion yuan in bonds, it was only able to raise 26.67 billion yuan in bids.
The average yield was 1.49% with the highest winning bid at 1.6%. The bid to offer was just 1.22x, down from 2.12x last month according to Bloomberg.
It’s unclear why investors weren’t willing to buy the bonds, perhaps the yields in the auction were far below what investors want given expectations for interest rate hikes in China.
Thing is, these are just one-year bonds, thus if you buy the bonds, you aren’t locking in your money for very long. If interest rates are increased at any point after a year, you can take part in receiving higher yields.
Thus to us this failed auction suggests that Chinese investors very much expect a substantial hike, not just a minor hike, for Chinese interest rates within a 1-year period.
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