Chinese government bond returns were modest in July, compared to their global peers, following concerns over the global economic downturn. YTD Chinese $ high yield credit losses deepened compared to those of US HY, which rallied.
A shallow or severe recession ─ that is the question? Most G7 central banks reaffirmed their inflation-fighting commitments in July as they implemented a series of aggressive rate rises. Despite the PBoC’s more dovish monetary policy vs G7 peers, China’s growth forecast was also significantly downgraded, mainly due to Covid-related restrictions.
Consensus further slashed its G7 growth forecasts in July, as consumer demand and economic activity deteriorated. The main worry for investors during the month concerned the severity of the global economic downturn, as central banks reiterated their desire to prioritize taming inflation over boosting growth.
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