Yields on Chinese corporate bonds are decreasing at a record rate following a decision to allow insurance companies to boost bond holdings, Bloomberg reported. Bond premiums on 10-year notes issued by AAA-rated firms shrank 49 basis points to 89 basis points in 2010, the largest drop since 2006. Ping An Insurance Group, the country’s second largest insurer, said it will raise the amount of bonds it holds relative to other securities. "So long as we can get hold of the paper, we prefer corporate bonds," said Deputy Chief Investment Officer Timothy Chan. Chinese corporate bonds have the lowest yields of the world’s four largest developing economies. Companies prefer bonds that can produce potentially higher returns in an inflationary environment. The renminbi-denominated bond market expanded 54% in the first half of 2010, attaining a net value of US$546 billion.
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