Hot money leads to a decrease in the yield, not only in the debt markets of Western countries and Japan, but also in China market.
The yield on ten-year bonds has reached a historical low since 2009.
Before the Chinese government bond yields probed new lows, an auction was held, at which the bonds were sold at a record low yield since 2004, when statistics began to be kept.
But then the market has reflected this in the secondary market either.
Financial institutions that receive virtually free money from their central banks are buying up virtually any bonds that still have at least some yield.
According to the latest data of the People’s Bank of China, foreign investors increased their investment in June in Chinese government bonds by 47.7 billion yuan, equivalent to $ 7.2 billion. Total investments amounted to 764 billion yuan.
In general, after China opened access to its financial markets, the inflow of foreign capital significantly affected the dynamics of the whole range of securities, including corporate sector. There is also a decrease in the yield.
In addition, local investors are getting rid of the corporate sector bonds and prefer safe government securities. The fact is that the situation in Chinese economy has slightly deteriorated and the risk of default of many companies is now estimated to be quite high. In addition, in recent time there were quite a lot defaults themselves.
It is worth noting that the Chinese financial market is becoming more and more like a bubble. A couple of years ago, we watched the inflated bubble in the stock market, by the way, then it burst, and now there is a similar situation in the debt market.
However, when compared with other markets, the situation there is no better.