China’s benchmark sovereign bond yield gains to 2.87pc

China’s benchmark sovereign bond yield jumped the most in a year, as quickening inflation sowed doubts about whether the nation’s notes can maintain their world-beating advance, Bloomberg reports.

The 10-year government bond yield climbed by six basis points to 2.87% on Monday, its biggest rise since July 2020, after eight straight weeks of declines. That’s after China’s July factory-gate inflation unexpectedly returned to a 13-year high of 9% touched in May.

A rise in short-term interbank rates also weighed on government debt. The surge in inflation is fueling concern that price pressures in the world’s second-largest economy may not be transient.

Rising inflation may also complicate potential easing measures from the People’s Bank of China and slow the rally in bonds that’s partly fueled by expectations of liquidity support from policy makers to boost the slowing economy.

“We can’t rule out a large correction in Chinese bonds in the short run,” following its rapid ascent recently, said Ming Ming, head of fixed-income research at Citic Securities Co. “The window for the central bank to ease the monetary policy will soon be closed.”

China’s bonds are still the only gainers this year in the Bloomberg Barclays Global Treasuries benchmark index.

That’s because the rally -- initially sparked by a surprise cut in banks’ reserve ratio requirement last month -- has extended after worries over regulatory crackdowns spurred haven bids.

A resurgence of coronavirus infections and signs of weaker activities in the manufacturing sector prompted traders to price in further easing, including a potential interest-rate cut.

Analysts from JPMorgan Chase & Co., HSBC Holdings Plc and BofA Securities have recommend bullish expressions in Chinese government bonds.