China’s central bank to focus on impact on stability of non-bank financial institutions: working paper
China will pay closer attention to the influence of non-bank financial institutions on financial stability, and the impact of local policy interventions on broader global markets, according to a central bank working paper published on Tuesday. In recent years non-bank institutions such as trust and investment companies, or fund and asset management firms have expanded their activity – much of it a less regulated form of lending – even as policymakers have tried to rein in leverage in the Chinese economy. “Though banks still dominate China’s financial system, non-bank financial institutions have considerable influence as well,” the paper published on the People’s Bank of China website said. “We believe that sufficient attention should be given to international spill-over effects of intervention policies, and the impact of non-bank financial institutions to financial stability,” it said. The paper analysed the impact of changes in China’s stock market and financial sector on developed countries – the United States, Britain, Germany and Japan.
Slate of data shows Germany economy barrelling ahead
German industrial production fell by less than expected in March following two strong months while exports and imports both hit record-highs in March, data showed on Tuesday, suggesting Europe’s biggest economy picked up steam in the first quarter. In another sign for a continued upswing and improved labour demand, job vacancies hit an all-time high in the first three months of 2017. The overall robust readouts are the latest in a batch of solid economic figures that are likely to help Chancellor Angela Merkel burnish her economic credentials ahead of a Sept. 24 federal election, when she will seek a fourth term. Her gap with the main opposition Social Democrats has already been widening. The economic numbers also underline the strength of the German economy compared with its peers. Foreign Minister Sigmar Gabriel, a Social Democrat in Merkel’s coalition, has urged her conservatives to adopt a less rigid stance in fiscal policy toward France after the election of the pro-reform centrist Emmanuel Macron as president.
TREASURIES-U.S. bond yields climb before three-year auction
Treasury yields climbed on Tuesday, with benchmark yields reaching a five-week peak before a $24 billion auction of a three-year government debt issue in what will be the first leg of this week’s $62 billion quarterly refunding. Investors were making room in their portfolios not only for Treasuries supply but also new corporate bond issues. Companies raised more than $10 billon in the investment-grade market on Monday, with more on the way. Junk bond issuance experienced a spike, according to IFR, a Thomson Reuters unit. In addition to supply pressure, bond yields have risen on investors’ reduction of safe-haven holdings in Treasuries following centrist Emmanuel Macron’s victory in the French presidential election on Sunday. With this closely-watched European election out of the way,
investors turned their attention back to U.S. economic fundamentals and how they would influence the pace of Federal Reserve interest rate increases in 2017, analysts said.