China's Bond Rally Accelerates With Best Daily Gain in a Month

(Bloomberg) -- China’s red-hot bond rally is ending the year on a high note.

The nation’s 10-year government bond futures surged as much as 0.49 percent in intraday trading, the most since Nov. 14, and the yield on the notes fell in the cash bond market. This came as the People’s Bank of China on Friday net injected 220 billion yuan ($32 billion) -- the biggest addition in five months -- into the financial system through open-market operations. The increased supply of funds helped push down the overnight repurchase rate, which made buying debt cheaper.

China's Bond Rally Accelerates With Best Daily Gain in a Month

The yield on China’s 10-year government bonds has fallen about 60 basis points this year -- making them among the world’s best-performing sovereign notes -- as the economy slowed and a plunge in stocks sent investors to haven assets. Official rhetoric is also pointing to more easing, with the PBOC saying Thursday it would keep liquidity ample. Citic Securities Co., the nation’s biggest brokerage, says the yield will drop to 3 percent in 2019.

China’s 10-year government bond futures rallied 0.42 percent, extending this week’s advance to 0.76 percent, to 97.7 as of 4:28 p.m. in Shanghai. That’s the highest since January 2017. The yield on sovereign bonds due in a decade dropped 3 basis points to 3.27 percent, while the overnight repo rate fell 33 basis points to 1.39 percent.

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