July 4, 2023

Fixed Income Insights (China) - July 2023

Monthly report

Chinese government bonds underpinned by PBoC need to drive growth

Chinese sovereign spreads fell sharply, notably vs the UK, reflecting inflation rates. China IG credit is in a sweet spot, but HY depressed by property woes, YTD, despite recoveries in June. Foreign outflows from onshore government bonds has slowed, but yuan weakness may have reduced the appeal of RMB bonds.

Key highlights:

  • Macroeconomic backdrop − China’s service sector is main growth engine but faces property and global headwinds
  • Chinese bonds − Onshore bond yields fell in Q2 and curve retains positive gradient vs deeper US curve inversion
  • Chinese and Asian bonds − Asian government spreads at or near one-year lows, as US Treasury yields rose
  • Performance − Indonesian and Indian governments outperformed in Q2 and YTD, while JGBs lagged

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.

For specialist content on a range of investment topics, including macroeconomic analysis and how it affects market performance and multi-asset analysis, viewed through our indices and data, explore our Global Investment Research hub.

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