The breakdown of the Chinese property market exemplified by the Evergrande crisis coupled with the unknowns of the shadow banking debt rocked China in 2021. China has been responding to these vulnerabilities. A Ministry of Finance official on Wednesday pointed to changes in the Chinese treasury bond market.
The official said China will issue a record amount of Treasury Bonds in 2022. The official added that China will guide overall interest rates lower for it’s Treasury Bond issuance in 2022.
China will guide more long-term foreign investors into its Treasury Bond market, though with all the uncertainties around China we are unsure what this entails. One would think this means a more stable environment and less hostile geopolitically. China has been hostile towards both Taiwan and Australia in the region, If so this would be a positive.
Just ten days ago China cut its benchmark lending rate for the first time in almost two years on providing support to an economy showing strain from a property slump and sporadic coronavirus virus outbreaks.
The one-year loan prime rate (LPR), on which most new and outstanding loans are based was cut from 3.85 per cent to 3.8 per cent at the December fixing. The five-year LPR, which is a reference for mortgages remained at 4.65 per cent, according to the People’s Bank of China (PBOC).
China bonds are not shunned as many would have you suggest. Sovereign bonds issued by South Africa, China, Indonesia, India and Croatia topped the rankings of 46 markets around the world in 2021, according to data compiled by Bloomberg through last week.
Chinese securities gained 5.6% in 2021, Indonesia’s climbed 5.2%, India’s rose 2.7%, and Croatia’s increased 1%. They shrugged off the biggest annual jump in U.S. Treasury yields since 2013, a shock that was powerful enough to upend currency carry trades and emerging-market stocks.
From The TradersCommunity News Desk