Higher yields, easing currency concerns, and further opening up of the domestic market are likely to prompt rising investment into China’s US$9 trillion onshore market by foreign investors in the coming months, according to analysts.
Bond yields on China’s onshore market have risen back to their levels of late 2014, driven by the rebound in inflation and commodity prices in November and December, and accelerated since March as interbank rates surged and the regulator cracked down on arbitrage and risky lending practises.
Yields on benchmark 10-year Chinese government bonds is now up about 100 basis points to above 3.65 per cent from its low in late October, and corporate bond yields are on average up by about 200 basis points.
Onshore Chinese yuan, meanwhile, has touched its highest level at above 6.75 yuan against the US dollar in nearly seven months, after China’s central bank set the yuan midpoint at the strongest point since November, in a strong show of force against short sellers.
“Yuan bears will either go into hibernation or take to the sidelines licking their wounds for the foreseeable future,” said Stephen Innes, senior trader at Oanda.
This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.