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The Chinese 10-year bond yields recovered from decade low Monday following gains in the equity market. China’s stocks opened on a solid note, climbing more than 1 percent and flirted around nine-month high.
The yield on the benchmark 10-year bonds, which moves inversely to its price, rose 3-1/2 basis points to 2.694 percent, the long-term 30-year bond yield also jumped 3-1/2 basis points to 3.117 percent and the yield on the short-term 2-year bonds climbed more than 1 basis point to 2.313 percent.
According to Reuters, Chinese stocks started the week on a solid note on signs that government measures to reduce overcapacity were starting to bear fruit. The optimism spread to Hong Kong, but gains both markets were capped by concerns over continued yuan weakness, as well as a possible U.S. rate hike in December.
Moreover, China’s sovereign bonds strengthened last week as investors poured into safe-haven assets on worries over the country’s property market restrictions and reduced leverage in the financial system, which is poised to weigh on its economic growth.
According to Bloomberg, policy makers have extended the tenors of money-market lending tools, spurring speculation that they want to curb excessive use of leverage in debt investments. Financial regulators plan to tighten control on funds flowing into the property market, according to people familiar with the matter. While data this week showed economic growth meeting expectations, industrial output for September missed estimates. Sentiment on China has also been affected by the yuan’s drop to a six-year low, which has raised concern of capital outflows.
On last Wednesday, China’s Q3 GDP growth stayed at 6.7 percent y/y, trended in line with the consensus, but in q/q terms, GDP growth nudged down to 1.8 percent q/q seasonal adjusted in the third quarter of 2016, from 1.9 percent q/q in previous quarter with growth in the secondary sector stayed at 6.1 percent y/y, while growth in the tertiary sector edged up to 7.6 percent y/y, from 7.5 percent y/y in the second quarter of 2016.
Meanwhile, People's Bank of China sets the USD/CNY reference rate at 6.7690, 0.2% weaker than 6.7558 last Friday and injects 170 billion yuan liquidity in reverse repos, including 40 billion yuan in 14-day repos and 60 billion yuan in 28-day repos.
The China's blue-chip CSI300 index rose 1.5 percent to 3,376.93 points at the end of the morning session, while the Shanghai Composite Index (SSEC) gained 1.3 percent to 3,130.70 points.
