China's 10-Year Bond Yield Drops to 2009 Low as More Easing Seen

  • Asia's largest economy growing at slowest pace since 2009
  • Government bond futures increase most in four months

China’s 10-year sovereign bonds climbed, pushing the yield to the lowest level since 2009, on speculation the central bank will ease monetary policy further to support the economy.

The yield on the notes due July 2025 dropped seven basis points to 3.06 percent as of 5:05 p.m. in Shanghai, according to prices from the National Interbank Funding Center. That’s the lowest level for a benchmark 10-year security since January 2009, ChinaBond data show. Ten-year bond futures on the China Financial Futures Exchange jumped 0.8 percent to 98.965 in the biggest increase since June.

China’s economy grew 6.9 percent in the three months through September from a year earlier, a report showed on Monday. That’s the slowest quarterly expansion since early 2009 and added to speculation monetary policy will be eased further. HSBC Holdings Plc predicted another 25 basis point cut in benchmark interest rates and a 1.5 percentage points reduction in banks’ reserve-requirement ratios before year-end.

“Given the weak growth momentum, the government will continue to roll out supportive measures,” said Yan Yan, a Shanghai-based analyst at China Guangfa Bank Co. “The rally in the futures market also gave a boost to market sentiment.”

The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, fell one basis point to 2.40 percent.

The People’s Bank of China sold 25 billion yuan ($3.9 billion) of reverse-repurchase agreements that add cash on Tuesday, the least since July 16. The seven-day repo rate, a gauge of interbank funding availability, was steady at 2.38 percent, a weighted average from the National Interbank Funding Center shows.

— With assistance by Helen Sun

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