(Bloomberg) -- China’s 10-year sovereign bond yield fell to 3% for the first time since 2016.
The yield on the country’s most-active notes due in a decade fell 1 basis point to briefly touch 3% in Shanghai. Escalations in global trade tensions since April have put a damper on sentiment in equities, helping spur a rally in Chinese sovereign bonds. The yield on the country’s 10-year debt is down about 40 basis points since a peak that month, and hasn’t traded below the 3% threshold since November 2016.
"The drop in the yield is probably a result of the rally in U.S. government bonds and the disappointing credit data," said Wu Sijie, a senior trader at China Merchants Bank Co. "The room for the decline is limited if China doesn’t lower rates for its medium-term lending facility."
China’s sovereign bonds lagged a global rally in recent months with one of the worst performances among the world’s biggest debt markets. Even as weak economic data strengthened the case for further easing, the trade dispute and concern over credit risks after the government takeover of a lender were among the reasons seen deterring investors.