Coupon payments weigh on China bonds

Flight to sovereign securities continues; COMAC debt slumps amid gloomy outlook for aircraft manufacturers

Coupon payments weigh on China bonds
Hard Landing: Plan COMAC’s bond saw its price slide on concerns air industry will be further hurt by more coronavirus outbreaks.

(ATF) China bonds declined Monday, with the benchmark ATF China Bond 50 Index sliding for the first time in a week, dragged down by coupon payments on two securities.

The ATF China Bond 50 Index fell 0.06%

The ATF CB50 fell 0.06%. Among the other ALLINDEX gauges, Local Governments slid 0.19%, the steepest decline since June 18; Financials fell 0.03%; Enterprises gained 0.06%; and, Corporates climbed 0.04%

The ALLINDEX Corporates Index rose 0.04%

The losses extended a decline on returns in Chinese corporate debt since the height of the coronavirus pandemic in March. Investors have been switching into government bonds amid increased debt sales from the People’s Bank of China to counter the pandemic-led economic downturn and to rebuild shattered industries. 

The ALLINDEX Enterprise Index rose 0.06%

Corporate bonds are also being hit by benchmark Chinese government bonds near record highs, which are offering investors attractive yields at a time when credit default risk remains high.  

The ALLINDEX Financials Index dropped 0.03%

The benchmark CB50 was pulled down by a coupon payment on the bond of the People’s Bank of Fujian, which also dented returns on the Local Governments Index, and the bond of CITIC Securities. That dragged down the Financial index, too.

The ALLINDEX Local Government Index lost 0.19%

Among Enterprise index bonds that of Commercial Aircraft Corporation of China saw its yield surge as new coronavirus outbreaks across the world led to more lockdowns, including travel restrictions that cloud the outlook for aircraft manufacturers.