(Bloomberg) — China’s benchmark sovereign bond yield jumped the most this year as the central bank sowed doubts over further interest-rate cuts and a stock rally lured investors away from government debt.
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Yields on China’s 10-year government bonds gained six basis points on Friday to 1.83%, set for the biggest rise since September. Poor demand for debt also spilled over to a bond auction, where a one-year note was sold at the highest yield since April 2024.
Bonds are coming under pressure after the People’s Bank of China Governor Pan Gongsheng’s comments suggested room for policy easing but uncertainty over the timing of rate cuts. China’s monetary stance has already been accommodative and relatively loose in the past few years, and the PBOC will cut interest rates and lower the reserve requirement ratio for lenders at “an appropriate time,” Pan said on Thursday.
Yields are also moving further away from record lows amid optimism over China’s economy after officials set an ambitious annual growth target of around 5%. A gauge of Chinese stocks in Hong Kong rose for a third session and is set for a gain more than 7% this week, in a sign that riskier assets are being favored.
“For now, it maybe a temporary pullback” in the bond market, said Albert Leung, a rates strategist at Nomura Holdings Inc. “But there seems no catalyst to break the previous low of 1.6% 10-year yield in the near term, if the PBOC will not ease soon and China and Hong Kong equity sentiment still holds up reasonably well.”
–With assistance from Iris Ouyang.
(Updates paragraph 2 with bond auction results.)
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