As economies reopen and supply-demand mismatches surface, central banks are facing the conundrum of when to taper their asset purchases.
The Fed has carefully signaled that they could soon start talking about tapering, demonstrating that they are wary of a repeat of the 2013 taper tantrum. The ECB, by contrast, looks keen to suppress any speculation about a slowdown in their purchases. Whether they succeed in this is another matter. That said, the ECB will use its upcoming policy review meeting as new ammunition in the battle to convince the market of its dovish intentions. The BoJ will face with similar questions, but probably at a somewhat later stage, given the slower reopening process of the Japanese economy.
For the PBoC we expect the balancing act between supporting growth, slowing leverage, and containing debt-cleansing spillovers to remain in place. However, the decline in the Chinese credit impulse is notable and does point to more favorable long-term prospects for Chinese government bonds relative to other markets.