China bonds revive amid new vaccine hope

Third contender to eradicate coronavirus spurs relief rally but concern remains over SOE securities

China bonds revive amid vaccine hopes
The ATF CB50 climbed 0.03%

(ATF) China credits climbed Monday for the first time in three days as the announcement of a third likely vaccine for coronavirus emboldened investors to take on riskier assets.

The gain ended the benchmark ATF China Bond 50 Index’s longest run of declines since September. The slump had been spurred by concern that a spate of defaults among state-owned companies would spread across the economy. Nevertheless, unease over SOEs remained, sending the Enterprise sub-index lower for a sixth consecutive day, its longest losing streak since July.

The CB50 climbed 0.03%, the steepest advance in more than a week after UK pharmaceutical giant AstraZeneca said the covid treatment developed with Oxford University was as effective as as two candidates unveiled last week.

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The news also sent bourses higher throughout Asia. Credits also got a positive bump from news that Chinese sovereign bonds fell to negative yields last week as investors, faced with record-low interest rates amid coronavirus monetary relief measures worldwide, sought higher-yielding debt of a relatively stable government.   

Among the biggest gainers were alternative investing firm Sino-Ocean Holding Group. The yield on its 4.76% bond dropped 0.08%. The yield on Wuxi Municipal Development Group’s 5.68% note slid 0.06%.

The Enterprise sub-index slid 0.01%, taking its losses in the past six days to 0.32%. They’ve been falling since Yongcheng Coal and Electricity Holding Group defaulted on a 1bn yuan bond, sending a contagion that spread to Brilliance Auto Group, an automaker linked to BMW.

According to an exclusive ATF report, about 120 SOE have defaulted in recent weeks.

Among the other sub-indexes, Corporates climbed 0.03%, Financials were unchanged and Local Governments dropped 0.07%. 

China Bonds China Bonds ATF China Bond 50 Index Vaccine Coronavirus SOEs