Deleveraging, Risk Prevention Kept China's Bond Market Bearish Last Year, Report Says
Xu Yanyan
/SOURCE : Yicai
Deleveraging, Risk Prevention Kept China's Bond Market Bearish Last Year, Report Says

(Yicai Global) Jan. 23 -- Deleveraging, the suppression of bubbles and risk prevention kept China's bond market bearish in 2017, and the market slumped three times during the year, per a recent China Foreign Exchange Trading System & National Interbank Funding Center report.

The turnover of the interbank market rose 3.9 percent annually to CNY997.8 trillion (USD156 trillion) last year, while that of the bond market fell 17.6 percent to CNY106.1 trillion.

Interbank deposits still ranked first among all types of transactions, followed by policy financial bonds and treasury bonds, the report said.

The bond market's first slump of the year took place in January and early February. A capital shortage caused by the Ministry of Finance introducing value added tax on asset management products and other factors pushed prices down. The yield on 10-year treasury bonds rose more than 40 basis points, indicating negative market conditions.

The second dip began in late March and ended in early May. After the People's Bank of China raised the operating interest of the open market, and the China Banking Regulatory Commission issued regulatory and self-examination documents and strong economic and financial data, the 10-year bond yield went up about 40 basis points.

The third rough patch ran from October to mid-November. The yield on 10-year bonds climbed nearly 40 basis points after China worked to maintain macroeconomic resilience, financial data exceeding expectations came out, overseas market yields rose and authorities released new regulations on fund management.

The yield on 10-year bonds surged 4 percent intraday, while that of China Development Bank bonds jumped 5 percent to a post-October 2014 high.

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Keywords: Bond , Volume