(Bloomberg) -- China’s growth is in danger of slowing further after weakening in April and May, with monetary policy makers having fallen behind in applying stimulus, according to Deutsche Bank AG (DE:DBKGn), which advises buying the nation’s bonds.
Monetary policy measures -- including cuts to benchmark lending rates, market interest rates and reserve requirement ratios -- will be necessary to support the economy, Linan Liu, greater China rates and FX strategist at Deutsche Bank, said in an interview with Bloomberg TV. That will boost Chinese government and policy-bank bonds, particularly the five and 10-year maturities, she said.
“The policy response was a little bit behind” as headwinds to growth mounted in the second quarter, Liu said. In part as a result, “there are risks that economic growth will decelerate further into the second half of this year, which means fiscal stimulus as well as monetary stimulus will need to be more stimulative into the second half,” she said.
Deutsche Bank has cut its second-quarter real GDP growth forecast to 6.2% from 6.4% earlier, Liu said.
Chinese bonds are also attractive because their yield premiums over U.S. Treasuries have climbed, Liu said. The yield on 10-year Chinese government bonds was down 3 basis points at 3.24% at 1:12 p.m. Hong Kong time.
