The biggest bull run in China’s bond market in a decade has faltered, as the central bank’s delay in easing monetary policy weighed on investors’ confidence about liquidity in the economy, while a re-rating of the stock market sapped demand for debt.

The yield on the benchmark 10-year government bond has been driven up to a three-month high of 1.83 per cent amid a debt sell-off, after rising by 15.4 basis points this year. One-year debt yields 1.541 per cent, a level not seen since July 2024, as investors grappled with the economy’s 5 per cent growth target this year.

The tumult in the fixed-income market is not over, according to Huatai Securities and Great Wall Securities, as the yield on 10-year bonds may soar to 1.9 per cent, or even touch 2 per cent.

The reversal of fortunes in China’s 170 trillion yuan (US$23.5 trillion) bond market has stunned investors, raising the question whether the bull run has been exhausted in the world’s second-largest capital market.

Source: SCMP