China’s year-end bond supply set to shrink

The issuance of Chinese government bonds is likely to contract sharply by the end of the year, which should take some pressure off a market already stretched by investors’ move into ￰0￱ to Bloomberg calculations, central and local authorities have only 16% — some 2.2 trillion yuan ($309 billion) — of their annual quota remaining, paving the way for the slackest fourth-quarter net supply since ￰1￱ supply shrinks as Beijing front-loads issuance The decline in issuance may help bring some balance and confidence to the bond markets, whose investors have become skittish with a proposal on the table to tax investment income and raise redemption fees for short-term ￰2￱ betray the warning: The 10-year benchmark rate has risen 23 basis points this quarter, to roughly 1.88% as of Tuesday.

“The significant supply shrinkage ahead will benefit market sentiment and help curb the ascent in bond yields,” said Zhou Guannan, analyst at Huachuang Securities, who expects the 10-year yield to fall to 1.7% by ￰3￱ front-loaded much of its 2025 bond issuance to cushion a faltering economy, persistent property troubles, and escalating trade frictions following US tariff ￰4￱ data show that bond sales in the first half of the year outpaced levels seen in the same period over the past three ￰5￱ pressure offers relief to skittish investors Officials say they favor a strategy of acting early, Finance Minister Lan Fo’an said this month, and wanted to seize the critical window,” and issue their policies decisively in one single ￰6￱ compiled data that show that local governments have already issued almost all of their 2 trillion yuan quotas for special refinancing bonds to replace off-balance-sheet ￰7￱ pending deals are about to be completed, as the central government is scheduled to release its final tranche of 1.3 trillion yuan in ultra-long special sovereign bonds on Oct. 10, according to its published ￰8￱ the “predictable supply from the special bonds concludes, the market is better able to absorb the remaining, more regular issuance,” said Wei Li, head of multi-asset investments at BNP Paribas Securities (China).

With supply expected to ease, Beijing may be able to expand debt programs and increase the bond quota — as it had done in recent years — if growth lags its target of about 5%. However, economists are expecting only modest steps, as China has already pushed up its annual budget deficit to a decade high in response to lingering economic problems. China’s fiscal strategy stands apart from global peers Some investors are adjusting allocations. U-Shine Private Equity FD Mgt Co., which holds one of the biggest caches of 30-year sovereign notes, is gradually adding to its position as yields will slide on better supply dynamics and a potential rate cut, said Xu Yongbin, co-chief investment ￰9￱ expectations for reduced bond supply stand in contrast to those of developed ￰10￱ the US, Japan, and Europe, longer-dated bond yields have soared as investor concerns mount over fiscal sustainability and widening budget ￰11￱ to BNP’s Li, China’s fiscal and supply outlook looks stronger than that of many developed markets, with the government taking a cautious approach that prioritizes optimizing existing funds instead of further expanding ￰12￱ seen where it ￰13￱ in Cryptopolitan Research and reach crypto’s sharpest investors and builders.