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CHINA: Bond Yields Continue to Grind Lower.  

CHINA
EM BulletAPACChinaEmerging Market NewsBulletMarketsFixed Income BulletsForeign Exchange Bullets
  • China’s Economic Work Conference’s vow to raise the fiscal deficit in 2025 just days after the Politburo alters the tone on monetary policy to ‘moderately loose’ has seen China’s bond yields drop lower again today.
  • The 10YR yield shifted below 1.8% for the first time.
  • Yet the reality is the bullish sentiment has been in charge of the China government bond market for some time.
  • Even the spectre of CNY10tn of new issuance was unable to stop the relentless charge lower in yields.
  • Bonds have seen support not just from monetary policy but from an asset allocation perspective for Chinese investors where the alternative (equities weighed down by the threat of tariffs) or real estate (in its third year of decline) offer sub standard return profiles relative to bonds.
  • Earlier this week we discussed the merits of China bonds versus Japanese Bonds and suggested the inflection point in the 10-year could be 1.50%.
  • Today’s move brings that suggestion closer, and it is something to continue to monitor. 
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  • China’s Economic Work Conference’s vow to raise the fiscal deficit in 2025 just days after the Politburo alters the tone on monetary policy to ‘moderately loose’ has seen China’s bond yields drop lower again today.
  • The 10YR yield shifted below 1.8% for the first time.
  • Yet the reality is the bullish sentiment has been in charge of the China government bond market for some time.
  • Even the spectre of CNY10tn of new issuance was unable to stop the relentless charge lower in yields.
  • Bonds have seen support not just from monetary policy but from an asset allocation perspective for Chinese investors where the alternative (equities weighed down by the threat of tariffs) or real estate (in its third year of decline) offer sub standard return profiles relative to bonds.
  • Earlier this week we discussed the merits of China bonds versus Japanese Bonds and suggested the inflection point in the 10-year could be 1.50%.
  • Today’s move brings that suggestion closer, and it is something to continue to monitor.