Chinese 10-Year Sovereign Bond Yields Slide to Lowest in December on Economic Growth Angst

The Chinese 10-year sovereign bond yields hit lowest in December as investors poured into safe-haven instruments amid rising concerns that the country may witness subdued GDP growth with the country unwilling to raise more debt to boost its economy.

The yield on the benchmark 10-year bonds, which moves inversely to its price, fell 6 basis points to 3.06 percent, the long-term 30-year bond yield also dipped nearly 6 basis points to 3.67 percent and the yield on the short-term 2-year bonds slid 11 basis points to 2.79 percent.

China is poised to abandon its 6.5 percent growth target sometime in the next two years as leaders push to contain asset bubbles and financial leverage, said Societe Generale in its report.

According to Bloomberg’s report, China’s President Xi Jinping told a meeting of the Communist Party’s financial and economic leading group on last 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.

Lastly, we foresee that bond prices will keep drifting between small gains and losses in quiet trading session. Also, trading activity will resume after New Year celebrations, probably from the second week of January, 2017 as global market receives no more important data till then.

Meanwhile, People’s Bank of China sets the USD/CNY reference rate at 6.9370, stronger than Thursday’s 6.9497. The China’s blue-chip CSI300 index traded 0.11 percent higher at 3,301.42 points, while the Shanghai Composite Index rose 0.07 percent to 3,098.31 points.

The material has been provided by InstaForex Company – www.instaforex.com