A rally in China’s government bonds prompted by the deadly coronavirus outbreak has rewarded big US and European investors that have bet on a slowdown in the world’s second-biggest economy, reported the Financial Times.
Chinese bond yields have fallen to four-year lows as investors turn to the safety of sovereign debt because of the spread of the disease, known as Covid-19. Investors are expecting Beijing to unleash more stimulus as it seeks to cushion the economic blow from the epidemic.
China’s 10-year Treasury yields, which fall as prices rise, have sunk more than 25 basis points to 2.87% since the start of the year. That rally accelerated in late January as Chinese authorities ordered businesses to shut, stoking fears of a sharp economic slowdown. Yields have not been below 3% since 2016.
“We’re . . . still very bullish on Chinese bonds across the board,” said Hayden Briscoe, Asia-Pacific head of fixed income at UBS Asset Management. The Swiss bank had already forecast China would have to increase stimulus to support its slowing economy prior to the epidemic. “Before . . . the virus we had expected yields to drop with slower [economic] activity,” he added.