After May's 'floor' episode, China bill rates rebounded from late May. Strong
bank demand in the final week pushed rates lower before demand was met and rates
snapped back on May 28–29; bill yields briefly dipped below 0.50%, and the
rediscount rate for bills maturing in November rose 11bp to 0.72%. On June 1
bills opened steadily, with the November rediscount rate at 0.72%. Market
participants say May's decline reflected weak real-economy financing demand,
slower bank credit deployment and ample liquidity; June may see some seasonal
credit improvement, but banks' bill demand persists and liquidity is likely to
remain moderately loose after the month rollover.
