(Bloomberg) -- China’s onshore high-yield debt market is suffering its worst day of trading in years as investors are on the lookout for more government measures to boost the economy.
Yields of some AA rated corporate notes issued by Chinese firms have soared by more than 30 basis points as of 4 p.m. Wednesday Beijing time, said two credit traders. They’re poised for the biggest daily jump since December 2014, according to a Chinabond index. Yields of top-rated corporate notes also climbed about 5 to 10 basis points, putting them on track to log their fifth day of increases, the traders added.
China’s corporate notes have taken a hit since the central government introduced a slew of stimulus measures to support economic growth late last month, including key policy rate cuts and a pledge of as much as $340 billion to support the stock market. The Ministry of Finance will hold a briefing on Saturday to introduce moves to strengthen fiscal policy.
READ: China Finance Minister Plans Briefing as Investors Seek Stimulus
China’s stock market notched 10 straight sessions of gains through Oct. 8, with the Shanghai Shenzhen CSI 300 Index — a key gauge — soaring 35%. The stock euphoria is also driving more cash from bonds to equities. As a result, wealth-management products including some bond-focused mutual funds are under mounting pressure to sell to meet redemption demands from retail investors, exacerbating the declines.
“It is mainly a see-saw effect between the equity market and bond market,” said Ting Meng, senior Asia credit strategist at Australia & New Zealand Banking Group. Funds flowed into equities post-stimulus, which drove bond yields higher, she said.
Today, stocks retreated after several strong sessions. so the bond market could stabilize a bit after that, Ting added.
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