China’s steel market sentiment showed improvement Oct. 25 after the central government late Oct. 24 sait it planned to issue Yuan 1 trillion ($136.7 billion) worth of sovereign bonds to support infrastructure construction.

          It was the first time in 23 years that China increased its fiscal deficit ratio twice in one year, showing the central government’s determination to increase its leverage to boost its economy, market participants told S&P Global Commodity Insights.

          The fiscal deficit typically refers to the gap when spending levels are higher than the income a government can generate. Some sources said the actual boost to steel demand from the treasury bonds is yet to be seen, but the move signaled

          China’s stance over fiscal deficits had become more flexible and accommodative. More such fiscal support is likely to follow, aimed at solving local government debt problems and preventing China from slipping into a balance sheet recession amid its property debt woes, soaring local government debt risks and sluggish consumer spending, the sources said.

          Amid improved steel market sentiment, the most actively traded January rebar contract on the Shanghai Futures Exchange closed at Yuan 3,673/mt on Oct. 25, up Yuan 63/mt on the day, exchange data showed.