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.
|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.
|Source: ISI Group|