Analysis: Is It Time to Go Long China’s Government Bonds?
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China’s long-term government bond yields have climbed back to levels last seen in late 2024, as institutions opted to lock in profits rather than join the typical year-end allocation rush.
The move has raised the question of whether rising yields are beginning to offer a more attractive entry point for long positions.
Yields on the benchmark 10-year note have risen about 10 basis points since November, briefly touching 1.87% Thursday. Broad selling across maturities by mutual funds and brokerages drove the move, while insurers’ buying was not strong enough to stabilize prices.
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- China’s 10-year government bond yields rose about 10 basis points since November, reaching 1.87%, as institutions sold off to lock in profits.
- Net government bond issuance in 2024 is expected to rise by 2.5 trillion yuan ($354 billion), increasing tradable supply by 4.5 trillion yuan, mostly absorbed by banks.
- Appetite for year-end bond buying is weak, but narrowing yield spreads and potential Fed rate cuts may create future opportunities.
- Huayuan Securities
- Liao Zhiming, chief analyst at Huayuan Securities, commented on the surging supply of Chinese government bonds. He projected a 2.5 trillion yuan increase in net government bond issuance this year compared to last year. Liao also estimated that the tradable supply of government bonds has risen by 4.5 trillion yuan, largely absorbed by banks. He cautioned that large issuances of ultra-long bonds could outpace demand.
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