(Yicai) Feb. 27 -- Chinese lenders might increase their holdings of bonds in their wealth management products’ investment portfolios as the country’s debt market goes from strength to strength and as interest rates tumble, industry insiders said.

Given the bullish bond market, there is a general trend by banks to reduce deposits and include more bonds in their wealth management investment portfolios, several institutional sources told Yicai.

Considering the current low risk appetite in wealth management, the bond market may attract more funds, said Wang Ziyu, a research analyst at China International Capital.

The bullish bond market has benefited from a looser monetary policy after the Lunar New Year holiday, said Sun Binbin, chief fixed income analyst at Tianfeng Securities. And interest rates continue to slide.

The trimming of the five-year loan prime rate earlier this month means banks will earn less money from lending and may turn to bonds for a better return, said Yang Yewei, chief fixed income analyst at Guosheng Securities. This though could lead to a further decline in bond yields.

The yield of China’s 10-year treasury bond sank to a new low of 2.37 percent yesterday and closed at 2.39 percent, a drop of 0.33 percent. The 10-year treasury bond yield has declined for the last three months.

New wealth management assets are expected to be mainly bonds and interbank negotiable certificates of deposit, Sun said.

Banks’ wealth management assets have consisted of more cash and deposits in recent years. The proportion climbed 3 percentage points to a new high of 26.7 percent as of the end of last year, nearly three times what it was at the end of 2020.

Editor: Kim Taylor