Investors in Chinese bonds head for 2025 betting there will be no miraculous recovery in the economy, putting them at odds with an equities market that has wagered on a revival in consumption.
Bond prices move inversely to yields and, because sovereign debt is regarded as a safe asset, they are affected by a combination of inflation expectations, interest rates, creditworthiness and appetite for risk in other asset classes. “I think the Chinese bond yields should be lower if they were to reflect the current economic situation in the country,” said Edmund Goh, investment director of fixed income at abrdn in Singapore.
The yield on the popular Tianhong Yu’Ebao money fund , which is China’s largest with more than 600 million investors, hit a record low at 1.266% this week. Risks to the bond market are some of the same factors supporting equities - that China unveils a large fiscal spending plan which requires extra borrowing and leads to higher inflation, both of which are negative for bonds.