China’s bond rout deepens as policy bank yield tops 5%

SHANGHAI • The sell-off in China’s bond market worsened, with the yield on a quasi-sovereign issuer exceeding 5% for the first time since 2014.

The 10-year yield on China Development Bank notes was 16 basis points higher at 5.04% as of 4:50pm in Shanghai yesterday, resulting in the biggest spread in three years against similar maturity government notes — whose yield rose four basis points to 4.03%.

“There’s no positive news now, and funds will probably continue to flow out, bringing further pressure to the market,” said Shen Bifan, head of research at First Capital Securities Co Ltd’s fixed-income department in Shenzhen.

Rising inflation, a government deleveraging campaign, and expectations for tighter liquidity toward the year-end have prompted asset managers to shift funds out of the bond market.

China Development Bank, a so-called policy bank, downsized its debt auctions at least twice over the past month as the slump deepened.

The 14-day repurchase rate climbed the most this month yesterday as the People’s Bank of China refrained from injecting cash into the financial system. — Bloomberg