China: How far can bond yields go? – ANZ

China’s 10-year bond yield has risen sharply from 3.62% at the end of September to 3.93% today, the worse month for bonds since January and the highest yield in three years, points out the research team at ANZ.

Key Quotes

“The move has primarily been the result of solid economic data, but also on concerns about the Government’s deleveraging program. It is broadly expected that officials will not allow the yield to pop above 4%; all eyes are on the money markets to see how much liquidity is injected to prevent squeezes, as this will give a strong indication of authorities’ intentions.”