The improving economy is boosting demand for loans as evidenced by the acceleration in YTD credit growth to 1.31% by the end of May from 0.62% on 22 April. As a result, banks transferred their capital to the lending channel, reducing demand for bonds in the primary market while the yield curve flattened. The potential spike in inflation in June (est 5.5% YoY) also made investors demand a premium on current short-term yields.