Chinese sovereign bonds slide as manufacturing PMI expands at fastest pace since December 2013

The Chinese sovereign bond declined Wednesday after recent data showed that the country manufacturing PMI expanded at the fastest pace since December 2013.

The yield on the benchmark 10-year bonds, which moves inversely to its price, rose 9 basis points to 3.14 percent, the long-term 30-year bond yield jumped 3-1/2 basis points to 3.65 percent and the yield on the short-term 2-year bonds bounced 6 basis points to 2.83 percent.

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.

Lastly, the minutes from the 13 - 14 December FOMC meeting will be published Wednesday, 4 January at 19:00 GMT. Markets will likely pay close attention to this release in an attempt to estimate the Federal Reserve's likely next step, particularly anything that might trigger a move to resume pausing for an extended period.

Meanwhile, People's Bank of China sets the USD/CNY reference rate at 6.9526, weaker than Tuesday’s 6.9498. The China's blue-chip CSI300 index traded 0.60 percent higher at 3,362.28 points, while the Shanghai Composite Index rose 0.55 percent to 3,153.31 points.

While at 06:00 GMT, the FxWirePro's Hourly Chinese Yuan Strength Index stood neutral at -17.53 (lower than -75 represent a bearish trend).