Summary: China 10Y yield normalized in Nov after spike last month as PPI dropped more than expected. Looking into December, yields will remain soft as trade tension is set to return under low rates environment globally. China will inject liquidity and prepare for the coming Chinese New Year season. Credit bond market continue to be under controllable pressure.
Sovereign Bond Market: yield normalized to the trend line
The move of China 10yr yield in Nov was dominated by normalization from a short term yield spike in previous month, it is flirting with the trend line since 2017 again. Oct CPI data surprised to the upside (or wasn’t a surprise at all given everyone is talking about the pork price surging) didn’t manage to get the relatively high yield level supported. The main detractor, and a decisive one, is the production price, which dropped larger than expected. This is further confirmed by industrial production yoy, which surprised to the downside.
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