(Yicai) Oct. 9 — China’s demand for safe assets shrank as investors turned to riskier stock markets after the government announced stimulus packages to support economic growth. The bond market is falling.
Yesterday, the first trading day after the National Day holiday, the seven-year US Treasury yield rose 3.75 basis points to 2.1075%. 10-year and 30-year bonds rose 3 basis points to 2.19% and 2.365%, respectively.
On September 24, the People’s Bank of China announced the largest economic stimulus package since the coronavirus pandemic. Since then, the Shanghai Composite Index (SHA: 000001) and Shenzhen Component Index (SHE: 399001) have risen nearly 20% and 30%, respectively. The ChiNext Index (SHE: 399006) and the Shanghai Stock Exchange Star 50 Index (SHA: 000688) surged about 50%.
Fluctuations in the bond market may create redemption pressures. But industry insiders say the risks are still manageable.
Yin Ruijie, chief fixed income analyst at National Development Investment Corporation Securities, said the bond and stock allocation will soon be balanced. Going forward, Yin added that attention will need to be paid to the pace of participation of allocators, the stability of liquidity, and the response of regulators to fluctuations.
Redemption pressure is controllable and there will be no large-scale redemptions if stock market sentiment cools in the short term, multiple asset managers told Yi Cai.
Liu Yu, a fixed income analyst at Huaxi Securities, said it is unlikely there will be much redemption activity this month.
Jing Yi, a bond analyst at Guohai Securities, said October was a month of intensive policy implementation, meaning the bond market still faced the risk of disruption. He predicted that the 10-year Treasury yield could fluctuate between 2.1% and 2.2% in the near term.
The scale of assets under management last month decreased by 782.6 billion yuan (US$110.8 billion) from August to 29.27 trillion yuan (4.14 trillion US dollars), but was in line with the average for the same period in recent years. Yields on credit bonds and the net value of wealth management products may decline after the holidays.
Editor: Futura Costaglione
