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China Bond Yield Turning Briefly Negative Shows Investor Risks

By any standards, the move in a normally dull Chinese policy bank bond was unusual. The 2027 bond surged more than 200% in Friday trading, sending the yield to -14% by the close. On Monday, the move was erased, but concern over what happened will linger.

The Shenzhen stock exchange scrambled to minimize the fallout from the moves, which occurred in three China Development Bank bonds. It restricted trading for those who bought and sold the bonds for the next six months, while it also issued an order preventing retail investors from buying two of the bonds for now.