In today’s briefing:
- China Eases Covid Treatment Guidelines
- Early Signs of a Geopolitical Risk Premium in China’s Bonds?
- BoE: Rates Hit Third Base During Home Run
- CX Daily: China’s Tightening of Online Insurance Sales Starts to Bite
- EA: More Fuel on the Inflationary Fire
- The Fed is Hitting The Brakes: Are You Wearing your Seatbelt?
China Eases Covid Treatment Guidelines
- The National Health Commission of the PRC(NHC) published the revised covid treatment guideline yesterday which we think is a key step toward the adjustment of its “zero covid” policy.
- We believe the revised guideline is a significant step toward further easing China’s covid strategy.
- However we think China will not change its dynamic zero-covid policy any time soon.
Early Signs of a Geopolitical Risk Premium in China’s Bonds?
- Foreign investments in China’s government bonds had been on the rise in recent years with the market appearing to acquire a safe-haven status as it became more accessible and liquid.
- Russia’s invasion of Ukraine may have changed this as the country is likely to default despite its large international reserves, which presents spillover risks to others, particularly China.
- After suffering heavy losses in Russian holdings, investors are likely to factor in political and geopolitical risks more explicitly going forward, which would work against China.
BoE: Rates Hit Third Base During Home Run
- The BoE delivered a third back-to-back rate hike in March to 0.75%. However, Jon Cunliffe surprisingly dissented against a change now.
- Some modest tightening “might be appropriate in the coming months”, consistent with another hike in May. The BoE now notes “risks on both sides of that judgement”.
- We still expect a slower tightening pace (quarterly) beyond May as rates get closer to neutral (1.5%) and the peak passes in inflation pressures.
CX Daily: China’s Tightening of Online Insurance Sales Starts to Bite
In Depth: China’s tightening of online insurance sales starts to bite
Chinese regions offer rewards for tip-offs on trafficked women and children
Deutsche Bank joins global peers with link to Beijing Stock Exchange
EA: More Fuel on the Inflationary Fire
- EA HICP inflation was revised up slightly to hit 5.87% y-o-y, but the ex-tobacco index still rounded down to 5.9% as expected on an index of 111.35 (forecast: 111.30).
- We expect the headline rate to rise again in Mar-22, probably continuing the trend of incinerating consensus forecasts. The spike in fuel prices energises this change.
- Core inflationary pressures are uncomfortably high for the ECB, including in the slowest moving measures. We see the annualised core rate broadly tracking at slightly over 3%.
The Fed is Hitting The Brakes: Are You Wearing your Seatbelt?
- I am not sure everybody has grasped yet how important was the message Jerome Powell sent yesterday during the FOMC press conference.
- While market commentators are focusing mostly on the mere 25 bps hike and the lack of details on Quantitative Tightening, I believe they are missing the point: the forward guidance was very hawkish, and very clearly so.
Powell is becoming more and more hawkish as time goes by. I identified 4 key hawkish messages he conveyed
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