Renewed virus concern slows bond rally

New infections across the country and especially in the northeast are weighing on investors fearful that more lockdowns will damage China’s recovery

Renewed virus concern slows bond rally

(ATF) The rally that has seen Chinese corporate and municipal bonds stage their best start to a year on record slowed Tuesday as a resurgence of coronavirus cases damped investor appetite.

The bond of Dalian Port slumped as the Heilongjiang region it serves appeared to bear the brunt of new infections. 

The ATF China Bond 50 Index was little changed as was the Corporate, Financial and Enterprise sub-indexes. Local Government bonds rose 0.02%. The benchmark index has climbed almost 1% since September and 0.85% since Christmas. 

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China’s credit and other risk markets have surged in recent months on data that showed the nation is pulling strongly out of the pandemic downturn of early 2020. The world’s second-largest economy recored its only quarterly GDP contraction of the past three decades last year after officials shut down industry and confined citizens to the homes to halt the virus’ spread.

Investors are concerned the new outbreaks will slow the recovery. Stocks on the CSI300 stock index slumped 0.8% as news suggested the renewed spread was gathering pace.

Major cities across China are already imposing or warning of new lockdowns. Fuzhou is the latest metropolis to announce emergency measures, signalling how far south the outbreak has spread from Hebei Province. Other newly affected cities such as the heavily industrialised Changchun and Jilin are also now locked down. 

The yield on Dalian Port’s 4.95% bond rose 0.36%. The city lies in the northeastern province that has had one of the worst new outbreaks.  

The resurgent virus is layering additional problems onto a severely cold winter season that’s having an impact on everything from agricultural output to energy production.  

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