Chinese sovereign bonds gain as President Xi Jinping dumps 6.5 pct economic growth target

The Chinese sovereign bonds gained Monday as President Xi Jinping dumped economic growth target of 6.5 percent in his Friday’s speech, targeting debt bubble and economic outlook. We foresee that bond prices will keep drifting between small gains and losses in quiet trading session.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell nearly 2 basis points to 3.19 percent, the long-term 30-year bond yield dipped 3 basis points to 3.76 percent and the yield on the short-term 2-year bonds slid 7 basis points to 2.99 percent.

According to Bloomberg’s report, told a meeting of the Communist Party’s financial and economic leading group on Friday that the country may forego its 6.5 percent economic growth objective due to concerns about rising debt and an uncertain outlook for Asia’s largest economy.

Some meeting participants sounded the alarm about unsustainable debt, noting that other nations have experienced crises after borrowing climbed to around 300 percent of GDP, the person said. China’s debt-to-GDP ratio rose to about 270 percent this year, they added.

Meanwhile, People's Bank of China sets the USD/CNY reference rate at 6.9459, stronger than Friday’s 6.9463. The China's blue-chip CSI300 index traded flat at 3,307.16 points, while the Shanghai Composite Index traded marginally lower, falling 0.15 percent to 3,105.37 points.