China Bond Bulls Seek Central Bank Support After Worst Week Since 2013

(Bloomberg) -- Bond investors burned by the worst week for Chinese government debt in more than five years should look to the central bank for comfort, according to analysts.

Despite data showing a surprise jump in a manufacturing gauge, the People’s Bank of China is likely to keep monetary policy loose, thereby supporting bonds -- goes the argument. One brokerage said a reduction in banks’ required reserve ratio is possible this month, while a bank pointed to inflows from foreign investors as shoring up sovereign debt.

The yield on 10-year bonds rose 19 basis points last week, the biggest increase since November 2013, in a shock to investors. Buying government debt has been a surefire way to make money in the past 14 months, with the yield falling from around 4 percent to 3.07 percent at the end of March -- the lowest since December 2016.

The yield on the most actively traded 10-year bonds was little changed at 3.25 percent as of 4:34 p.m. in Shanghai. Futures on notes of the same tenure rose 0.14 percent, the first advance in six sessions.

Here’s what analysts said:

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