China's 50-Year Bond Auction Draws Least Demand Since 2009

China’s sale of 50-year bonds drew the least demand since the country began issuing the securities in 2009 as economic growth slows and investors brace for a reduction in U.S. monetary stimulus.

The Ministry of Finance sold at least 20 billion yuan ($3.3 billion) of notes due 2063 paying 5.31 percent, the highest yield since the nation started selling the tenor. A Bloomberg survey of five traders and analysts forecast a rate of 5.05 percent. The government received just 30.2 billion yuan in bids, compared to 42.6 billion in May, when the securities sold to yield 4.24 percent.

Concerns the country’s economy is slowing and speculation the U.S. Federal Reserve will scale back stimulus have sent yields on China’s local currency bonds surging this year. Government notes pay an average 4.52 percent, the most since 2005, according to JPMorgan Chase & Co. index data.

“There are concerns about growth, reforms, other things, and you have a backdrop of negative risk ahead with tapering,” Win Thin, the global head of emerging-market strategy at Brown Brothers Harriman & Co. in New York, said in a telephone interview. “As tapering expectations pick up, emerging markets get whacked, not just in currencies, but in local bonds as well. That duration is incredibly long, so that’s even riskier. The long end is going to take the brunt of the weakness.”

China’s government today vowed to ease the country’s one-child policy, expand farmers’ land rights and encourage private investment in state businesses as part of the most sweeping changes since the 1990s, as it seeks to find new sources of growth while sustaining its grip on power.

To contact the reporter on this story: Boris Korby in New York at bkorby1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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