China 10-Year Bonds Drop for Fourth Day After GDP Tops Forecasts

China’s 10-year bonds fell for a fourth day as economic growth that beat forecasts damped speculation policy makers will loosen monetary policy further.

Gross domestic product in Asia’s largest economy increased 7.5 percent from a year earlier in the second quarter, more than the 7.4 percent median estimate in a Bloomberg survey, official data showed yesterday. Aggregate financing climbed to a three-month high in June, another report showed this week, adding to signs growth is gathering pace after the central bank lowered reserve requirements at selected banks.

“Both pieces of data this week improved, so longer-dated bonds fell,” said Cici Wang, a Beijing-based fixed-income analyst at Citic Securities Co. “The central bank may maintain a similar monetary policy in the third quarter, but there may not be additional easing measures.”

The yield on the government’s 4 percent bonds due June 2024 rose five basis points, or 0.05 percentage point, to 4.40 percent as of 10:22 a.m. in Shanghai, according to data from the National Interbank Funding Center. The yield, which has increased 20 basis points this week, is at the highest level for a benchmark 10-year sovereign note in three months.

The seven-day repo rate, a gauge of interbank funding availability, fell seven basis points to 3.63 percent, according to a weighted average compiled by the National Interbank Funding Center. The rate’s fixing averaged 3.36 percent in the second quarter, compared with 4.04 percent in the previous period.

The central bank will offer 18 billion yuan ($2.9 billion) of 28-day repurchase agreements today, according to a trader at a primary dealer required to bid at the auctions.

The cost of one-year swaps, the fixed payment needed to receive the floating seven-day repurchase rate, rose five basis points to 3.98 percent, according to data compiled by Bloomberg. The rate touched 3.99 percent earlier, the highest level since April 16.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE