Daily Business Report

---

China's Bond Market Faces Turmoil Amid Maturity Deluge Posted: 31 Oct 2019 06:26 AM PDT While the US bond market has had its share of harrowing slumps and vomit-inducing short squeezes in the past year as consensus shifted from one of "the neutral rate is far away" to "here comes NIRP", China's bonds have been a bastion of stability, trading in a tight range between 3% and 3.50% for the past year. hat may be about to change. The reason: a wall of bond maturities is about to flood across China's sovereign-bond market, which in the past three months has already been reeling from a global sell-off and rising inflation. According to Bloomberg, more than 2 trillion yuan ($283 billion) of local-government notes will mature in 2020, a record and 58% more than this year's level. This means fresh debt to refinance upcoming maturities will start hitting the market soon, with a the southern province of Guangdong expected to sell notes as early as November. This is happening as China's 10-year yield rose 3 basis points to 3.31%. the highest since late May, while the cost on 12-month interest rate swaps jumped 5 basis points to 2.92%. The yield on China Development Bank's 3-year bonds due January 2022 rose 10 basis points to 3.25%. Despite trading in a narrow range, China's government bonds have been sliding for nearly two months, starting around the time a "growth shock" hit US rates and sparked the infamous quantastrophe, with the 10-year yield hitting the highest since May as selling momentum accelerated. Naturally, a flood of new supply will only exacerbate the weakness, especially as real, inflation-adjusted yields are barely above zero, a rarity for emerging markets. Read the entire article

You are subscribed to email updates from Daily Business Report. To stop receiving these emails, you may unsubscribe now.	Email delivery powered by Google
Google, 1600 Amphitheatre Parkway, Mountain View, CA 94043, United States