China Government Curve Bear-Steepens On PBoC Comments

The China Government Bond Curve has bear-steepened, with yields 1-5bps higher across benchmarks after a PBOC official’s comments suggest low yields have deviated from sound economic fundamentals. Currently, the 10-year yield stands at 2.243%, up from yesterday's cycle low of 2.215%.

• Today’s movement follows observations by Bloomberg indicating that local credit yields in China have reached their lowest levels ever, as investors seek higher returns by investing in corporate bonds amidst a liquidity-rich financial system. (See link)
• Moreover, it comes after the CH-US 10-year yield differential pushed to a fresh cycle high of 239bps, surpassing the previous high of 226bps set in October last year.
• The US tsy 10-year is currently 2bps cheaper at 4.62% in today’s Asia-Pac session after reaching a fresh YTD yield high of 4.69% last week.