Subdued Yield Level Makes No Harm to the CGBs Outlook Subdued Yield Level Makes No Harm to the CGBs Outlook Subdued Yield Level Makes No Harm to the CGBs Outlook

Subdued Yield Level Makes No Harm to the CGBs Outlook

Greater China Sales Traders

Summary:  Bond yields in China tested key level in August as global yields were under pressure from worldwide central banks were getting dovish. The new LPR facility rolled out by PBOC added funding strength to both equity and fixed income markets alike. Meanwhile, Bond Connect volume reached another record high in the month.

China bond markets

Government bonds: short term yield recovery

As expected, China sovereign yield tested 3% level and even broke that level briefly at mid Aug, as yield hunting globally has driven demand on China bonds. It can be seen that foreign bond buying activities picked up significantly through CIBM and bond connect. However, FED managed to maintain its independency, even just for now, has managed to keep market’s expectation on yields to hold for now. China has carried out multiple actions to marketize funding rates, such as Loan Prime Rate, to drive up bank’s willingness to lend to SMEs. The act itself was supposed to drive the rates down, however speculation of Chinese government will continue to implement fundamental support to its economy has brought some confidence to its stock market. Demand for safety assets is lower so yields recovered moderately.

However, China-US trade woe is not going away, with both sides not backing up much. Tariffs were increased on 1st of Sep and another batch is planned in Dec, for both sides. Global yields are taking a breather in reaction to Fed’s trying to talk down the possibility of major rate cuts. However economic situation is not improving much. Geopolitical uncertainties loom, with middle east is at the verge of breaking out military action, new British government is looking to have a hard Brexit, ect. Safety assets are not given up, just that markets were seeking better returns, temporally. As market now is quite fragile, any break out is possible to lure capital into safety asset again. Chinese government bonds seem to be a good choice, after all, the yields are still not bad.


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (
- Full disclaimer (

Saxo Capital Markets HK Limited
19th Floor
Shanghai Commercial Bank Tower
12 Queen’s Road Central
Hong Kong

Contact Saxo

Select region

Hong Kong S.A.R
Hong Kong S.A.R

Saxo Capital Markets HK is a company authorised and regulated by the Securities and Futures Commission of Hong Kong. Saxo Capital Markets HK Limited holds a Type 1 Regulated Activity (Dealing in securities); Type 2 Regulated Activity (Dealing in Futures Contract); Type 3 Regulated Activity (Leveraged foreign exchange trading); Type 4 Regulated Activity (Advising on securities) and Type 9 Regulated Activity (Asset Management) licenses (CE No. AVD061). Registered address: 19th Floor, Shanghai Commercial Bank Tower, 12 Queen’s Road Central, Hong Kong

By clicking on certain links on this site, you are aware and agree to leave the website of Saxo Capital Markets, proceed on to the linked site managed by Saxo Group and where you will be subject to the terms of that linked site.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

Please note that the information on this site and any product and services we offer are not targeted at investors residing in the United States and Japan, and are not intended for distribution to, or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation. Please click here to view our full disclaimer.