Strong Bond Rally This Past Week As 10yr Yields Fall

• The bond market continued to rally into the close of the week, topping off a very strong week for the market.
• Bond yields were lower across the curve, taking lead from global moves in bonds given expectations for a September cut by the FED.
• Bond yields were 0.5bp – 1bp lower on the day.

Today’s moves

2yr 1.495% (-0.5bp) 5yr 1.809% (-1bp) 10yr 2.110% (-1bp) 30yr 2.336% (-0.5bp)

• The key observation for the strong week in bonds was the move lower in the 10 year.
• Previous indications had been that authorities had preferred to see the 10 year 2.20% or higher, to reflect a stronger outlook for the economy.
• Given recent unexpected policy rate cuts, it is likely that the 2.20% target level is no longer an objective.
• Moves for the week have been lower across the curve, though not to the same extent seen in US Treasuries.

Moves lower in the week most active in intermediate and longer dated maturities as investors come to grips with a lower trajectory for growth.

2yr (-0.5bp) 5yr (-6bp) 10yr (-7bp) 30yr (-7bp)

• Key data next week:
• Caixin PMI composite and services: 05/08
• Trade data: 08/08
• CPI / PPI: 09/08
• New Yuan Loans / Aggregate Financing 09-15 /08