(ATF) The ATF China bond indices fell across the board on Wednesday, with the China Bond 50 flagship index retreating 0.17%, while the ATF ALLINDEX Corporates and Enterprise dropped 0.15%. The ATF ALLINDEX Financial and Local Governments lost 0.11% and 0.01%.
On Wednesday, China’s 10-year bond yield extended its rise to 3.11% as risk appetite moved from government paper to stocks, which climbed for a seventh consecutive day on the back of hopes for an economic recovery. The Shanghai Composite index increased 0.7%, after rising 0.37% on Tuesday, and rallying 5.71% on Monday.
The ATF Corporates Index lost 0.15%.
Additionally, concerns regarding adequate liquidity are triggering an increase in borrowing costs, ahead of the government’s plan to issue 1 trillion yuan ($140bn) of special purpose bonds to support the economic recovery by the end of July.
On Wednesday, the People’s Bank of China (PBoC) decided not to conduct reverse repo operations for an eighth consecutive day, compounding liquidity concerns.
The ATF Enterprise Index lost 0.15%.
Sovereign bond weakness is feeding through to the quasi-sovereign and corporate bond market, with issuers shelving bond sales amid rising borrowing costs, as reported.
Within the China Bond 50 index, significant losses were seen in industrial names, namely Guangzhou Metro Group, China State Construction Engineering, and Xi-An Hi-Tech Holding, whose bonds lost 0.44%, 1.11% and 0.31%, respectively. The losses also dragged on the ATF ALLINDEX Enterprise, of which the bonds are also constituents, alongside losses from Qingdao City Construction (-0.58%), Urumqi City Construction (-0.64%) and Nanjing State-Owned Assets (-0.38%).
The ATF Financials Index lost 0.01%.
In addition, financials in the China Bond 50 Index retreated, with losses in the bonds of Shanghai Pudong Development Bank (-0.49%), Bank of Communications (-0.6%), China Mingsheng Banking Corp. (-0.37%), China Merchants Bank (-0.41%), Industrial Bank (-0.61%), Ping An Bank (-0.21%), China Citic Bank Corporation (-0.41%), and China Zheshang Bank (-0.13%). These names also dragged down the ATF ALLINDEX Financials.
Along with Guangzhou Metro Group, Suqian City Construction weighed most heavily on the ATF ALLINDEX Corporates, retreating 0.25%.
The ATF Local Government Index lost 0.11%.