Chinese sovereign bonds plunge on upbeat PMIs

The Chinese sovereign bond plunged Thursday after recent PMI numbers showed that the world’s second-largest economy ended the year on stronger footing.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose 7 basis points to 3.22 percent, the long-term 30-year bond yield jumped 1/2 basis point to 3.66 percent and the yield on the short-term 2-year bonds bounced nearly 3 basis points to 2.86 percent.

The Caixin China services purchasing managers index (PMI), which is based on a monthly survey of over 400 private sector businesses, improved to 54.4 in December from 52.4 the previous month. Also, composite PMI rose to 53.5 in December from 52.9 in November.

On Wednesday, the Caixin Purchasing Managers' Index (PMI) rose to 51.9 in December, up from 50.9 clocked in November. The reading of 51.9 comfortably surpassed market expectations.

Moreover, Chinese bond investors are finding that trouble comes in threes. First a U.S. rate hike, then a squeeze on short-term lending that dried up fixed-income liquidity, and finally a scandal at a brokerage which fuelled fears about wobbly leverage underpinning China's bond market rally, Reuters reported.

Meanwhile, People's Bank of China sets the USD/CNY reference rate at 6.9307, stronger than Wednesday’s 6.9526. The China's blue-chip CSI300 index traded 0.10 percent lower at 3,365.05 points, while the Shanghai Composite Index rose 0.14 percent to 3,163.21 points.

While at 06:00 GMT, the FxWirePro's Hourly Chinese Yuan Strength Index stood neutral at -65.76 (lower than -75 represent a bearish trend).