China's bond market gains as central bank resumes debt purchases amid growth concerns

Core Viewpoint - China's bond market is expected to gain momentum due to the central bank's resumption of government debt purchases, driven by weaker economic data and the need for further policy easing [1][4]. Economic Data and Trends - October's economic data revealed a deteriorating growth outlook, with industrial production growth falling short of expectations, fixed-asset investment declining, retail sales slowing for the fifth consecutive month, and persistent declines in housing prices [2]. - The yield on China's benchmark 10-year sovereign bond is projected to decrease to 1.65% or 1.7% within the year, down from the current 1.808% [1]. Policy Expectations - Analysts anticipate a 20-basis-point cut in the policy rate within the next six months to support the bond market, reflecting the urgency for monetary easing due to weak economic indicators [4]. - There are expectations for further monetary policy loosening in China, particularly in light of potential rate cuts in the US, which could align the monetary policies of both economies [3][7]. Market Performance - China's bonds had previously underperformed compared to stocks, as investor interest shifted towards riskier assets amid enthusiasm for artificial intelligence and improved Sino-US relations [5]. - The yield on 10-year debt had risen to 1.905% in September, marking a 28-basis-point increase over four months, but reversed course when the People's Bank of China resumed bond purchases after a nine-month pause [6].