China’s bond rally sends yields to record lows, prompting concerns of ‘disrupting’ economy
- Up to 2.5 billion yuan worth of two types of 10-year treasury bonds will be sold on Tuesday amid risks that the bond bubble could burst
In China’s 10-year treasury bond market, the Ministry of Finance is looking to manage liquidity amid mounting concerns among policymakers that long-term yields have been too low.
The ministry said online on Monday that it planned to sell up to 2.5 billion yuan (US$344 million) worth of two types of 10-year treasury bonds on Tuesday to “improve the liquidity of the secondary market for government bonds, and to improve the government bond yield curve that reflects the relationship between market supply and demand”.
China’s long-term treasury bond market has seen a record rally since last year, sending yields to record lows as investors search for safe-haven assets amid weak confidence in the country’s economic outlook.
The benchmark yield on China’s 10-year treasury bonds traded as high as 2.262 per cent and moderated to trade around 2.251 per cent at noon on Monday, following the finance ministry’s statement.
A scrambling by institutions for government bonds is equivalent to an expectation that interest rates will continue to fall
The statement also came amid a series of warnings by the People’s Bank of China (PBOC) over risks that a bond bubble could burst, which could destabilise financial markets and derail the nation’s uneven economic recovery.
