Policy Easing Sends 10Y Yield To New Lows

• China interest rates have been falling in recent weeks following clear easing signal from Chinese officials to stimulate both the economic activity and risky assets, which are still trading at ‘distressed’ levels.
• As China maintains a ‘zero-Covid’ policy, the discovery of a new variant has resulted in renewed restrictions/local lockdowns imposed by the governments and therefore lowers growth expectations.
• After breaking below key level at 2.80% in the end of December, China 10Yyield has been testing a new support at 2.67% this week, which corresponds to the 76.4% Fibo retracement of the 2.46% - 3.36% range (2020/20201 low high).
• A break below that level would open the for a move down to 2.60% (May 2020 low)..
• Key support stands at 2.4610%, which was the low reached in April 2020 followed the March panic.
• In addition to the easing policy cycle, the elevated uncertainty related to the ‘zero-Covid policy’ could also continue to support ‘safe’ assets such as government bonds in the medium term.

Source: Bloomberg