China’s 10-year sovereign bond yield fell to 3% for the first time since 2016, joining a global rally of government debt as the nation’s economy slowed and its trade dispute with the US worsened, said Bloomberg.
The yield on the country’s most-active notes due in a decade fell 1 basis point to briefly trade at 3% in Shanghai. Escalations in the trade war since April have put a damper on sentiment in equities, helping spur a rally in Chinese sovereign bonds. The yield on the country’s 10-year debt, which hadn’t touched 3% since November 2016, is down about 40 basis points since its April peak.
The advance in Chinese bonds followed a rally in their US counterparts, as the yields on American long-end debt approached an all-time low overnight amid rising global trade concerns, political upheaval in Hong Kong and a crisis in Argentina. China’s economy also showed fresh signs of slowing, with data released on Monday suggesting the nation’s credit demand tumbled to the second-lowest amount this year in July.
“The drop in the yield is probably a result of the rally in US government bonds and the disappointing credit data,” said Wu Sijie, a senior trader at China Merchants Bank Co. “The room for the decline is limited if China doesn’t lower rates for its medium-term lending facility.”