China’s 10-year government bond yields drop to lowest since June 2002

SHANGHAI: China’s 10-year government bond yield dropped to the lowest in more than two decades as investors still...
30 Jan, 2024

SHANGHAI: China’s 10-year government bond yield dropped to the lowest in more than two decades as investors still expect more policy easing to lift economic recovery after China announced a cut to bank reserves last week.

Yields on China’s 10-year government bonds dropped below 2.47%, the lowest since June 2002. China 10-year treasury futures for March delivery rose to the highest since April 2020.

Yields on China’s 30-year government bonds dropped to a record low of 2.71%.

Market participants are expecting more policy stimulus including a rate cut to shore up the shaky economic recovery, as reflected in China’s stock market.

China’s stock market tumbled in 2023 and had extended its slide in the new year amid foreign selling.

The blue-chip CSI300 Index has bounced from a five-year low hit earlier this month, but is still down about 4% year-to-date.

Besides the announced reserve requirement ratio (RRR) cut, analysts at Goldman Sachs continued to expect China’s central bank to cut policy rates in the first and third quarters, and to cut RRR again in the second and fourth quarter to facilitate economic growth.

China’s yuan inches lower

Analysts at Western Securities said monetary policy is likely to maintain a balanced easing stance in the short-term, and funding conditions are expected to be favouring bond markets.

China’s central bank announced a deep cut to bank reserves last week, in a move that will inject about $140 billion of cash into the banking system and send a strong signal of support for a fragile economy and plunging stock markets.

Read Comments