China’s bond market, the second largest in the world, is tense after a tumultuous week during which the central bank began to heavily intervene to stop a decline in yields despite the country’s weak economy.
Still, ardent investors argue that the government bond bull market has legs because of the unstable economy in China, pressures toward deflation, and a lack of interest in riskier assets.
A bond fund manager declared, “We remain actively bullish,” despite the government’s unprecedented attempts to calm the raging treasury market and stop the rates’ downward spiral.
“We see a rosy economic picture… and we’re under peer pressure to generate returns,” the manager from Beijing stated, requesting anonymity because the subject matter is delicate.
Even those who have become pessimistic seem hesitant. Investor Wang Hongfei in Treasury futures remarked that when the market battles with regulators get more intense, he decided to be “opportunistic” in the short term by trading swiftly in skirmishes.
As investors flee volatile stocks and a collapsing real estate market in favour of government bonds and banks’ lower deposit rates, China’s central bank has issued repeated warnings about potentially destabilizing bubble risks. Diminished yields further impede the People’s Bank of China’s endeavours to stabilize the declining value of the yuan.
However, the authorities have launched a new front in the war of attrition against speculators and unwanted price movements in the nation’s stock and currency markets, with the PBOC now putting warnings into action to settle down bond bulls.
