China's rate expectations continue to decline. The chart below shows China's 2-year domestic rate (SHIBOR) swap level - the market expectation of where average short-term rates will be for the next two years.
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| China 2-year rate swap (SHIBOR) |
With inflation seemingly under control and the stock market near recent lows, the authorities will have little choice but to further bring down short-term rates.
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| Source: ISI Group |
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