SocGen’s Chong Says China’s Swap Curve to Steepen on Rate Cut

Wee-Khoon Chong, a Hong Kong-based fixed-income strategist at Societe Generale SA (GLE), comments on China’s second interest-rate cut in a month.

“Is this the last one? Possibly, but the market would definitely be looking for more. The magnitude of easing this time is more of less similar to the one delivered in early June.

‘‘The rate cut today is likely to re-widen the spread between two-year non-deliverable interest-rate swaps and one- year benchmark deposit back to the low and therefore leading to steepening of the two- to five-year swap curve. We would like to reiterate our call for a two- to five-year swap steepener, with a first target of 60 basis points, to hit its 2009 high of 100 basis points in the coming months.’’

To contact the reporter on this story: V. Ramakrishnan in Mumbai at rvenkatarama@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.