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.’’
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