China's Bonds Tumble From a Top Performer to Asia's Worst Bet

(Bloomberg) -- China’s government bonds, among some of the world’s top-performing debt last year, have tumbled so much over the past month they’ve become the worst bets in Asia-Pacific.

The yield on 10-year government bonds has surged more than 30 basis points since late March, as wagers on broad monetary easing receded due to a better economic outlook and a rally in stocks. Singapore’s sovereign notes were the second-worst performer, followed by the Philippines.

China's Bonds Tumble From a Top Performer to Asia's Worst Bet

Further strain on Chinese debt came Wednesday, when the central bank injected cash by offering targeted medium-term loans. That move means an imminent cut to lenders’ reserve requirements is unlikely and reinforces bets that aggressive loosening seen in 2018 won’t be repeated.

The plunge in Chinese bonds is a far cry from last year, when the notes rallied on weakening risk appetite. It comes as some government and policy bank bonds have just started getting included in a major global index.

The debt may begin looking attractive to investors soon, with Pacific Investment Management Co. saying the slump has made the notes so cheap that it’s probably time to start buying on a small scale. The yield premium on China’s 10-year bonds over Treasuries of the same tenor also expanded to the widest in a year, making yuan assets more appealing to foreigners.

The yield on China’s 10-year government bonds fell 1 basis point to 3.42 percent as of 4:56 p.m. in Shanghai.

©2019 Bloomberg L.P.