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Onshore Bond Sell Off Extends, 10yr Yield Back To Early March Levels

CHINA RATES
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China local government bond yields are rallying across the major benchmarks. We are 7-bps higher across the 2-30yr benchmarks, with the 5yr yield up 10bps at this stage.

  • The 10yr yield, last around 2.37%, is back to highs from early March this year.
  • We have had warnings from the authorities around excessively low yields in recent weeks, while easing expectations from a monetary policy standpoint have also been pared. Over the weekend local media reported that the PBoC is reportedly guiding some rural banks to reduce leverage and lower duration in the bond investment space in parts of the country (per BBG).
  • These factors may be contributing to the moves, while the rally in both onshore and Hong Kong equities, led by property and tech names, could also be weighing on bond risk appetite.
  • Otherwise it's difficult to find direct catalysts for today's bond yield move.
  • Note tomorrow on the data front we have the official PMIs print tomorrow in terms of the next important data update. The market expects the manufacturing and non-manufacturing PMIs to both ease from March levels.
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China local government bond yields are rallying across the major benchmarks. We are 7-bps higher across the 2-30yr benchmarks, with the 5yr yield up 10bps at this stage.

  • The 10yr yield, last around 2.37%, is back to highs from early March this year.
  • We have had warnings from the authorities around excessively low yields in recent weeks, while easing expectations from a monetary policy standpoint have also been pared. Over the weekend local media reported that the PBoC is reportedly guiding some rural banks to reduce leverage and lower duration in the bond investment space in parts of the country (per BBG).
  • These factors may be contributing to the moves, while the rally in both onshore and Hong Kong equities, led by property and tech names, could also be weighing on bond risk appetite.
  • Otherwise it's difficult to find direct catalysts for today's bond yield move.
  • Note tomorrow on the data front we have the official PMIs print tomorrow in terms of the next important data update. The market expects the manufacturing and non-manufacturing PMIs to both ease from March levels.