Sell-off in Chinese Bonds: Reasons and Outlook

The sell-off in Chinese bonds is accelerating, with futures on ultra-long-term bonds reaching their lowest level in four months.

The upward trend of the domestic stock market is gaining momentum, while futures contracts for 30-year government bonds fell by up to 0.7% on Thursday.

The world's second-largest bond market has been under increased pressure in the past month, as trade tensions with the US ease and there is optimism about taming deflation.

According to Lynn Song of ING Bank, bond yields are affected by the reallocation of assets, as equities have performed well.

Official data showed that a key lending indicator for Chinese banks shrank for the first time in two decades in July.

Zhaopeng Xing of Australia & New Zealand Banking Group notes that loose liquidity leads to risk-taking.

Source: OT