Growth signals lift China bonds

Second day of encouraging economic output data spurs fixed-income investors

Growth signals lift China bonds

(ATF) The benchmark ATF China Bond 50 Index of corporate and municipal bonds climbed for a third day as yet more data indicated the Chinese economy is growing.

The bonds of state-owned-enterprises also gained as investors shrugged off concerns that a spate of defaults in the sector would spread.

The ATF CB50 climbed 0.02%. Of the sub-indexes, Enterprises, Corporates, Financials and Local Governments advanced 0.01%.

The latest purchasing managers index (PMI) survey data on factory output climbed to a 10-year high, with other key measures including labour supply showing marked improvements.

The closely watched Caixin/Markit industry report came in at 54.9 in October from 53.6 in September, well above the 50 level that indicates growth. That’s the highest reading since November 2010 and follows an official factory PMI survey from the National Bureau of Statistics (NBS) on Monday that showed activity at a three-year record.

Bonds have rallied in the past month as officials have lowered barriers to foreign access to Chinese capital markets and amid growing optimism for the economy.

Although considered safe, Chinese debt carries a higher default risk and wider spreads than similarly rated securities of Western economies. That’s made them more attractive to yield-hungry investors in a world of ultra-low and even negative interest rates.

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