China's 10-Year Bond Yield Falls to Three-Week Low on Slowdown

Updated on
  • Data suggests Asia's largest economy is still deteriorating
  • Bond investors likely to remain bullish, says Citic analyst

China’s 10-year sovereign bonds advanced, pushing the yield to a three-week low, on signs the economy is still slowing even after waves of monetary easing and stimulus.

A privately compiled purchasing managers’ index for manufacturing and services declined this month, while a business sentiment gauge dropped sharply from October. Asia’s largest economy is heading for its slowest annual growth in a quarter of a century even after six interest-rate cuts in the past year as well as reserve-ratio reductions and fiscal stimulus.

The yield on the notes due October 2025 fell three basis points to 3.10 percent as of 4:43 p.m. in Shanghai, data from the National Interbank Funding Center show. That’s the lowest level since Nov. 3. The benchmark 10-year yield has declined 49 basis points since the end of June and dropped last month to 2.98 percent, the lowest since 2009, according to ChinaBond data.

“The economic fundamentals in China are that the downward pressure on growth is still heavy,” said Ming Ming, a Beijing-based fixed-income analyst at Citic Securities Co. “Under such circumstances, the bond market will remain bullish, even though the bull run will be at a slower pace, and further downside for yields is limited.”

The seven-day repurchase rate, a gauge of funding availability in the financial system, rose two basis points to 2.30 percent, according to a weighted average compiled by the National Interbank Funding Center. The cost of one-year interest-rate swaps, the fixed payment to receive the floating seven-day repo rate, was steady at 2.38 percent.