China's stock market bull run is translating into a rout for bonds and ultra-long debt
Futures on 30-year sovereign notes fell as much as 0.7 per cent on Thursday, extending this week's drop to 1.5 per cent at the low as a gauge of onshore equities reached its highest point since October. The moves are less dramatic in the cash bond market, with yields on the same maturity government paper up one basis point.
The world's second-largest bond market has come under increased pressure in the past month, thanks to easing US-China trade tensions and optimism that efforts to curb overcapacity and excessive price wars will pull the economy out of deflation. Dwindling expectations for further monetary easing in the short term, as well as the imposition of a tax on certain bond investments, have also soured investor sentiment.
Weighing on bonds is 'asset allocation rotation as equities have fared well lately and there may be a gradual recovery of some investor risk appetite,' said Lynn Song, Greater China chief economist at ING Bank. 'To support the bond market, we would need to see measures such as cuts to the benchmark rate.'
While the traditional see-saw effect between stocks and bonds appears to be the driving force behind investors' decisions at the moment, how far the debt market sell-off can go may ultimately hinge on China's growth momentum.
Official data released Wednesday showed a key measure of lending at Chinese banks contracted for the first time in two decades in July, with broad credit growth also slowing.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
South China Morning Post
an hour ago
- South China Morning Post
Why EU stance on Taiwan is a growing cause of concern for mainland China
This year marks half a century of formal diplomatic relations between China and the European Union as well as the 25th anniversary of the founding of the European Union Chamber of Commerce in China. In this, the fourth part of the series, Shi Jiangtao looks at how the issue of Taiwan is overshadowing the relationship. As mainland China and the European Union mark 50 years of diplomatic ties, there is growing concern in Beijing that the bloc may be undermining its one-China policy, as Brussels – and some individual member states in particular – expand informal diplomatic relations with Taiwan. Historically viewed as a diplomatic formality, Taiwan has gained increasing prominence in Beijing's relations with the EU over the past decade. This has complicated Brussels' efforts to balance between economic partnerships with Beijing, strategic alignment with Washington, and growing unofficial trade and cultural ties with Taipei. After establishing diplomatic relations with Beijing in 1975, all member states of the European Economic Community – the precursor to the EU – formally recognised Beijing as the sole legitimate government of China, a stance now mirrored by most of the world. This commitment, routinely reaffirmed in subsequent high-level exchanges, has long been seen by Beijing as a major diplomatic red line. It regards the issue as both a gauge of the EU's adherence to the one-China policy and a litmus test of Brussels' much-touted drive for strategic autonomy amid intensifying US-China rivalry. In recent years, however, several European countries have expanded ties with Taipei, seeking to actively reinterpret their one-China policy – distinguishing it from Beijing's one-China principle, even as Brussels has stepped up efforts to 'de-risk' its relationship with mainland China.
South China Morning Post
3 hours ago
- South China Morning Post
Hong Kong top talent scheme's 54% visa extension rate ‘ideal', labour chief says
More than half of the professionals admitted to Hong Kong under a top talent scheme launched two years ago have applied to extend their stay, a rate that the city's labour chief has hailed as 'ideal'. Reviewing the Top Talent Pass Scheme, Secretary for Labour and Welfare Chris Sun Yuk-han also revealed on Friday that the median monthly salary of those who had successfully extended their visas was HK$40,000 (US$5,128), while a quarter earned HK$80,000. Sun also dismissed concerns that the new arrivals had consumed Hong Kong resources, noting that half of those who succeeded in extending their stay were aged 40 or below, while saying that small details in the scheme could be enhanced. The scheme, under which a two-year visa is usually issued to successful applicants, was launched by the government in December 2022 to counter a brain drain during the Covid-19 pandemic. In a closed-door media briefing on Friday, Sun revealed that the visas of 13,678 individuals had expired as of July 31, with 7,394 or 54 per cent submitting applications for an extension. Secretary for Labour and Welfare Chris Sun. Photo: Sun Yeung Including 2,305 people whose visas had not expired before July 31 but who had already applied for extensions, the Immigration Department had received 9,699 applications in total.
South China Morning Post
3 hours ago
- South China Morning Post
China's high-speed jet drone, Trump shrugs off Latin American moves: SCMP daily highlights
Catch up on some of SCMP's biggest China stories of the day. If you would like to see more of our reporting, please consider subscribing In an aviation tech breakthrough that could change naval warfare, Chinese aerospace engineers have unveiled what could be the world's first high-speed vertical take-off and landing (VTOL) drone powered by a jet engine. After six months of steady improvement, China's economy showed signs of strain in July, with several headline indicators losing momentum amid a weakening of domestic consumption, headwinds from the US trade war and a prolonged property downturn. President Donald Trump said the US was 'doing better than any other country in the world right now'. Photo: EPA US President Donald Trump on Thursday said he was not worried about Brazil, Mexico and other Latin American nations moving closer to China, telling reporters in the Oval Office, 'They can do whatever they want.'
