China 10-year treasury futures fall on higher US Treasury yield and higher govt bond supply
SHANGHAI :Chinese government bond futures prices fell on Monday, tracking higher U.S. Treasury yield, while rising expectations of accelerating government bond issuance also weighed on sentiment.
China's 10-year treasury futures for September delivery, the most traded contract, closed down 0.51per cent. The yield on benchmark 10-year government bonds rose about 6 basis points on the day.
Some traders attributed the falls in treasury futures prices to higher U.S. Treasury yields after strong U.S. nonfarm payrolls data on Friday.
With some investors now positioning for an earlier tapering of Federal Reserve stimulus than they had expected, markets were paying close attention to Beijing's signals on policy after recent data pointed to an economic slowdown in China. Some analysts believed a Fed tapering could restrain China's monetary easing.
"Early reporting of special bond projects for 2022, higher-than-expected U.S. nonfarm payrolls, sharp rises in U.S. Treasury yield, and China's steadily slowing exports showed a set of contradictions and policy responses," said Ming Ming, head of fixed income at Citic Securities.
Ming said China's domestic economic growth was facing some downward pressure, and the Fed tapering could prompt China to switch from monetary easing to faster fiscal expansion.
Traders said different approaches to prop up the economy could affect the bond market outlook, as fiscal easing meant rises in government bond supply, which would weigh on bond prices.
China's factory gate inflation in July rose at a faster clip from the previous month and exceeded market expectations, data showed, but export growth unexpectedly slowed last month following outbreaks of COVID-19.
Uncertainties around the impact from fresh outbreaks in China and government response measures led analysts from a number of global investment banks including Goldman Sachs and Barclays to recently revise down their third quarter growth forecasts.
(Reporting by Winni Zhou and Andrew Galbraith; Editing by Kevin Liffey)