Concerns are mounting among China’s bond investors that an outbreak of swine fever in the Chinese pork market could accelerate inflation and make a growing note sell-off even more serious, Bloomberg reports.
The bond market is already at risk due to a flood of municipal bonds hitting the market this month as Beijing attempts to stimulate the economy through a splurge of infrastructure spending. Analysts expect this supply deluge to siphon funds away from the inter-bank market. Average yields on the top Chinese corporate notes have already climbed 39 basis points over the past month to 4.44%.
Pork prices have risen 10% since early August due to the swine fever outbreak, which has affected six provinces and forced a travel freeze and the culling of thousands of hogs. A flood in eastern Shandong Province has also pushed crop prices higher.
“Bond investors are quite sensitive to any inflation concerns,” Wang Wenhuan, a fixed-income analyst at Huachuang Securities Co, told Bloomberg. “The sudden occurrence of the swine fever, together with flood and rising housing rentals in major cities will definitely curb sentiment on the bond market.”