March 06, 2024

Fixed Income Insights (China) – March 2024

Monthly report overview

Chinese bonds rally further after PBoC’s record rate cut

Chinese bond yields fell further in February after more policy easing. Interest rate differentials between the US and China widened further, as the Fed stayed on hold after stronger growth and above-target inflation. Foreign holdings of Chinese bonds recovered to 3.87 trillion yuan. Chinese $ property bonds rose on the lower 5-year LPR.  

Key highlights:

  • Macroeconomic backdrop − China continues easing measures, utilising tools of MLF, RRR and 5Y LPR in Q1
  • Chinese bonds − Chinese 20s/10s curve flattened sharply in February, driven by larger yield reductions in longs
  • Chinese and Asian bonds − Chinese spreads vs G7 fell back, almost reversing rises during the Q4 G7 rally
  • Performance − Indian bonds outperformed on 3M and 12M; Long JGBs benefitted from life insurers buying

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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