The ATF indices held relatively steady on Tuesday, with only the China Bond 50 index, the flagship index, slipping 0.02%.
The ATF ALLINDEX Corporates, Enterprise, Financial and Local Governments gained 0.01% as prices of existing bonds rose amid bond sale cancellations.
The ALLINDEX Corporate Bonds Index climbed 0.01%.
The China Bond 50 index was dragged down by a fall in the prices of China Development Bank and Agricultural Development Bank of China bonds. These dropped 0.43% and 0.88% respectively. However, the remainder of the financial names within the index rose.
The ALLINDEX Enterprise Bonds Index climbed 0.01%.
The yield on China’s 10-year bond reached 3.08% on Tuesday, following a rally in Chinese stocks on Monday after the government-owned China Securities Journal on Monday encouraged investors to purchase shares to support the recovery.
The rally continued through to Tuesday, with the Shanghai Composite Index rising a further 0.37%, after a surge of 5.71% in the previous session, and gaining for the 6th consecutive trading day, according to Trading Economics.
The ALLINDEX Financial Bonds Index climbed 0.01%.
Sovereign bond weakness may be feeding through to the quasi-sovereign and corporate bond market; companies cancelled about $11 billion-worth of deals in June, according to data compiled by Bloomberg.
The ALLINDEX Local Government Bonds Index climbed 0.01%
Bond investors are also taking on board the Ministry of Finance’s issuance of 1 trillion yuan of special-purpose debt to support the economic recovery. Meanwhile, the People’s Bank of China removed 490 billion yuan ($69 billion) from the banking system last week, the biggest weekly net drain since the week ending February 21.
The yield premium paid to hold Chinese government bonds over US Treasuries of the same tenor increased Tuesday to 241 basis points, its widest on record (US 10-year treasury yields stood at 0.67% at the time of writing).
This report appeared first on Asia Times Financial.