Chinese 10-year bond yields hit near 4-month high following global debt sell-off; likely to touch 3 pct mark

The Chinese 10-year bond yields hit near 4-month high Friday, following widespread sell-off in global debt market. Also, speculation of a rise in government spending by the newly elected President of the United States, Donald Trump will spur the economic growth of the States, lending a helping hand to its inflation prospects as well, raising probabilities of a December interest rate hike by the Federal Reserve.

We also maintain our previous forecast that the country’s benchmark 10-year treasury yields will likely touch the 3 percent mark in the near term, following increased chances of a revival in economic growth, coupled with recovery in consumer prices, which is likely to pressurize the country’s sovereign bonds.

The world’s second-largest economy’s consumer inflation rose for the second straight month during the period of October. China’s consumer prices increased by 2.1 percent y/y in October after 1.9 percent y/y; in line with estimates, while producer price increased by 2.1 percent y/y in October after 0.1 percent y/y; estimates were for 0.9 percent y/y.

On Friday, the yield on the benchmark 10-year bonds, which moves inversely to its price, rose nearly 3 basis points to 2.822 percent, the long-term 30-year bond yield climbed 2 basis points to 3.247 percent while the yield on the 5-year bonds fell nearly 1 basis point to 2.527 percent.

China's blue-chip CSI300 index rose 0.89 percent to 3,420.75 points and the Shanghai Composite Index rose 0.94 percent to 3,200.71 points.

At 6:05GMT, USD/CNY rose 0.13 percent to 6.81, compared to previous close of 6.80. Meanwhile, the People’s Bank of China (PBoC) set the USD/CNY reference rate at 6.8115, 0.34 percent weaker than 6.7885 yesterday.