August 3, 2023

Fixed Income Insights (China) - August 2023

Monthly report

Chinese bonds stabilise awaiting Politburo guidance on fiscal policy

Chinese regional government bonds outperformed YTD, with more issuance underway. China IG credit matched YTD performance of US peers, but HY fell again in July on default concerns. Foreign investors made largest net buying since January, as yuan strengthened. Stimulative measures boosted optimism.

Key highlights:

  • Macroeconomic backdrop − China proposes measure to boost consumption and the property market
  • Chinese bonds − Onshore bond yields edged lower, and curve remains upward sloped as foreign investors returned
  • Chinese and Asian bonds − Asian government spreads at or near one-year lows, as US Treasury yields rose
  • Performance − Malaysian, Korean and Thai bonds led gains in July; JGBs lost in USD terms despite a stronger yen

This report provides actionable insights on currency-adjusted performance, macro drivers, shifts in yields, spreads and curves across conventional government and corporate bonds, for both renminbi and dollar-denominated issues.

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