(Bloomberg) -- Spreads for Chinese corporate notes have widened to the most in a year as investors piled into the nation’s sovereign debt market.
The yield premium of three-year AAA-rated corporate yuan bonds over comparable central government debt grew to 55 basis points on Tuesday, a level not seen since last September, according to data compiled by Bloomberg. Spreads were little changed on Wednesday, tightening by about one basis point.
Recent spread moves have been primarily driven by investor enthusiasm in the sovereign bond market. China’s three-year government bonds yields fell by 13 basis points in the past five trading days, while the top-rated corporate bond yields only declined by about eight basis points, according to ChinaBond indexes.
China’s short-term government debt is benefiting from the central bank’s recent bond trading initiative, as traders eye more monetary easing amid weak economic data. The People’s Bank of China said Friday that it bought short-tenor notes and sold longer-maturity ones in August, when a blistering debt rally sent benchmark yields to record lows.
Spreads may rise further in September as the credit market is still facing many headwinds, Industrial Securities Co. analysts led by Huang Weiping wrote in a note on Thursday. Although the spreads have widened since August, the risk-return of corporate notes look less attractive compared with sovereign bonds.
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