Chinese bill yields continue to creep higher

A slow creep upward in Chinese 3 month and 6 month bills is further evidence that China is taking further steps in trying to tame the aftermath of a massive bank loan lending campaign in 2009. 3 month bill yields are at 2 month highs and 6 month bill yields are at 4 month highs after an auction of 3 month bills. The Shanghai index fell almost 2% in response. Chinese bank loans may fall about 20% in ’10 but after doubling in ’09. The rise in Chinese yields is also weighing on commodity prices and the US$ is up as a result. The US$ is also higher vs the yen after Japan’s new Finance Minister outright said he wanted a weaker yen. The Bank of England left both its benchmark rate and asset purchase plan unchanged as expected. Notwithstanding the BoE’s massive purchases of gilts, their 10 yr yield is near 14 month highs. Economic confidence in the Euro Zone rose to the highest since June ’08 in Dec but Germany saw some weaker than expected Nov data.

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