BBG: The bearish outlook for China's economy is encouraging investors in Hong Kong to seek safety in sovereign Dim Sum debt, helping the government cap borrowing costs even as the yuan declines. The Ministry of Finance will sell three-year notes at 2.61 percent as part of a 16 billion yuan ($2.6 billion) issuance today, compared with 2.60 percent in November, according to the median estimate in a Bloomberg News survey of four analysts. Dim Sum sovereign debt returned 1 percent this year, an HSBC Holdings Plc index showed, even as the yuan dropped 2.9 percent against the greenback. China's efforts to crack down on shadow banking and property investment are set to curb economic expansion to the slowest since 1990, triggering an 8.6 percent slump in Hong Kong's Hang Seng China Enterprises Index of shares this year. Rising use of China's currency in international trade and a reluctance to undertake riskier investments boosted Hong Kong's renminbi savings to a record 945 billion yuan in March.
USD/CNH seen between 6.2337 - 94 this morning, tracking USD/CNY closely, with the midpoint fixed a tad lower at 6.2353, vs prev 6.2369. The spread between USD/CNH and USD/CNY narrowed to almost nothing in recent weeks, and we expect movements in both to be limited on the day, even though the 6.2400 handle should be regained. Real demand in CNH has not surfaced in any big amounts, with speculative bids still present on the (USD/CNH) downside. C.L
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