(Bloomberg) -- Investors are returning to China’s corporate bond market again as a two-week stock market surge starts to lose steam.
Yields of most onshore bonds sold by Chinese companies declined about 10 basis points across different tenors and ratings Friday morning, according to two credit traders. The rally is set to ease what would be the worst week of trading in nearly two years for the country’s junk debt market.
The world’s second-largest bond market has witnessed mounting selloff pressure as investors rush to take funds out of fixed-income products and chase a stock rally. But falling bond prices and a sudden drought of funds flowing into the debt market has the potential to undermine the government’s efforts to bolster economic growth.
The average yield of yuan-denominated three-year AA rated company notes jumped about 23 basis points this week as of Thursday, setting the stage for the biggest weekly increase since December 2022, according to data compiled by Bloomberg based on a Chinabond index. The spread over sovereign bonds went up to 107 basis points, the highest level in a year.
The bond slump has prompted Chinese regulators to step up monitoring of commercial banks’ ability to meet short-term redemptions, Bloomberg reported Thursday. The CSI 300 Index, a key stock benchmark, fell as much as 2.4% Friday morning, after rising 35% in 10 straight sessions through Oct. 8.
©2024 Bloomberg L.P.