China manages to halt bond bulls in their tracks, for now
Repeating story from late Friday with no changes to text
SHANGHAI, Aug 16 (Reuters) -A long, frenzied bond rally in China has stalled, with prices down and turnover tumbling as investors step back after intensifying intervention by Beijing to stop yields from falling.
Ten-year treasury futures CFTc1 headed for a second weekly drop in a row on Friday, set for the largest fortnightly drop in nearly a year, even as a string of dismal economic indicators point to a slowing economy that would normally encourage bets on more policy easing and bond buying on one of the largest government bond markets in the world.
Exchange-traded bond funds in China had a spike in outflows on several days in a week where state banks were heavy sellers and media affiliated to the People's Bank of China reported warnings against reckless buying had begun to work.
Some bond-owning domestic wealth management products also slid to discounts to net asset values. The price action points to a market hunkering down for a tussle with authorities, just a raft of new bond sales are due in the coming weeks and months.
"What we are seeing here is a new round of PBOC action," said Julio Callegari, chief investment officer for Asia fixed income at J.P. Morgan Asset Management.
He has been reducing a long position in Chinese government bonds for months, partly in response to rhetoric from the central bank aimed at cooling the rally, and as a couple of months of solid bond issuance is expected ahead.
"We are closer to neutral, our longs are smaller," he said, with a reasonable scenario being yields eventually stabilising.
Long-dated bonds have been the focus over the past two weeks as China has called out risks of an asset bubble and slapped restrictions on the duration of new bond funds and increased scrutiny over brokers and banks bond dealings.
Ten-year yields CN10YT=RR on Friday were up nearly ten basis points (bps) from last week's record lows, while 30-year yields CN30YT=RR have bounced 8 bps to 2.383%.
Yields rise when bond prices fall.
A week ago the number of wealth management products whose market value dropped below net asset value jumped to hit 385 the highest since March 2023, according to Zheshang Securities and the market is showing other signs of deteriorating.
On Thursday just 30.9 billion yuan ($4.3 billion) worth of China's current 10-year note CN240011= was traded interbank compared to an average daily volume of 122 billion yuan last week.
Zhao Jian, head of Atlantis Finance Research Institute, said that authorities' moves to lift falling yields in a weak economy were "unfathomable," in a commentary on social media.
While aimed at reducing risk, he said the measures would likely damage market function by making participants reluctant to trade, eventually undercutting its financing and investing purpose.
China will stick to a supportive monetary policy and maintain policy stability, its central bank governorPan Gongsheng said in an interview with state news agency Xinhua on Thursday.
VOLATILITY
China's bond rally has run for years as pandemic lockdowns and a property-market collapse choked economic growth and the post-COVID recovery has disappointed at every turn - driving interest rates lower and therefore pushing bond prices higher.
Bond market returns are higher than deposit rates, which is attracting households. New bank lending is also scraping 15-year lows meaning idle bank capital has also streamed into bonds.
Authorities have pushed back, fearing a market bubble and the diversion of more and more money away from productive use.
To be sure, none of those forces are weakening, leading to deepening battle lines between market participants and authorities.
Bond supply is another wildcard, since as of end-July China had sold less than half of the combined 5.62 trillion yuan in local government and treasury bonds it plans for the year.
Ju Wang, head of greater China currency and rates strategy at BNP Paribas, also notes that foreigners who have been drawn in by lucrative swap rates may take the opportunity to book profits and close positions.
In a product disclosure on Thursday, the wealth management unit of Bank of Hangzhou said China's weak economic recovery means it will be easier for yields to go down than to go up.
But the bank expects more volatility as yields are already low, and is preparing to "seize trading opportunities".
($1 = 7.1730 Chinese yuan renminbi)
FACTBOX-How China is trying to cool a runaway bond rally nL4N3JZ0C8
China's treasury market rattled as central bank squares off with bulls nL1N3JZ07C
China hits pause on long bond rally https://tmsnrt.rs/46WaUy0
China's patchy economic recovery https://reut.rs/4cqQ3Un
Reporting by Shanghai Newsroom; Writing by Tom Westbrook; Editing by Kim Coghill
免責聲明: XM Group提供線上交易平台的登入和執行服務，允許個人查看和/或使用網站所提供的內容，但不進行任何更改或擴展其服務和訪問權限，並受以下條款與條例約束：（i）條款與條例；（ii）風險提示；（iii）完全免責聲明。網站內部所提供的所有資訊，僅限於一般資訊用途。請注意，我們所有的線上交易平台內容並不構成，也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。
所有缐上交易平台所發佈的資料，僅適用於教育/資訊類用途，不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議，或是交易價格紀錄，或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。
本網站的所有XM和第三方所提供的内容，包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接，皆爲‘按原狀’，並作爲一般市場評論所提供，而非投資建議。請理解和接受，所有被歸類為投資研究範圍的相關内容，並非爲了促進投資研究獨立性，而根據法律要求所編寫，而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊，相關詳情請點擊 這裡查看。
