China’s bond market gains as central bank resumes debt purchases amid growth concerns

Huayuan Securities forecast that the upward trend was likely to drive the yield on China’s benchmark 10-year sovereign bond down to 1.65 per cent within this year. Southwest Securities predicted a drop to 1.7 per cent. The yield currently stands at 1.808 per cent.

Expectations for policy loosening in China have also strengthened amid hopes for more rate cuts in the US, which would align the monetary policies of the world’s two largest economies to mitigate foreign exchange volatility.

“Given the weak economic data and falling property prices, there is an increasing urgency for the policy rate to fall,” said Liao Zhiming, an analyst at Huayuan Securities. The firm anticipated a 20-basis-point cut in the policy rate in the next six months, which would support the bond market in the fourth quarter.

“We are positive on bonds,” Liao said.