(Yicai) Oct. 9 -- China’s bond market has softened as investors charge into stocks following the country’s biggest economic stimulus package since the pandemic, sparking concerns about the potential for big redemptions of wealth management products. But experts believe the pressure to redeem is manageable at the moment.

If stock market sentiment cools in the near term, there will be no large-scale redemption, a number of wealth management firms told Yicai. The chances of significant redemptions this month are low, according to Liu Yu, a fixed income analyst at Huaxi Securities.

The bond market continued to fluctuate yesterday, the first day of trading after the week-long National Day holiday, opening sharply lower, followed by a gradual paring of losses. Some capital returned to the market in the afternoon, and the upward pressure on bond yields eased across different maturities.

As of yesterday’s close, the yield on seven-year Treasury bonds rose 3.75 basis points to 2.1075 percent. That on 10- and 30-year Treasury bonds gained 3 bps to 2.19 percent and 2.365 percent, respectively.

October is an intense month for policy announcements, so the bond market still faces disruption risks, said Jin Yi, a fixed income analyst at Guohai Securities. The yield on 10-year Treasury bills may fluctuate between 2.1 percent and 2.2 percent in the short term, he predicted.

The slew of stimulus measures that China’s central bank unveiled on Sept. 24 have quickly shifted the short-term balance between stock and bond allocations, said Yin Ruizhe, chief fixed income analyst of State Development and Investment Corporation Securities.

Chinese stocks have rocketed higher in the wake of the measures. The Shanghai Composite Index [SHA: 000001] and the Shenzhen Component Index [SHE: 399001] have surged nearly 20 percent and 30 percent, respectively. The ChiNext Index [SHE: 399006] and Shanghai Stock Exchange Star 50 Index [SHA: 000688] have soared about 50 percent.

The amount invested in WM products, which are typically tied to a mix of bond and stock investments, so rapid changes in bond yields can create volatility in their returns, fell by CNY782.6 billion (USD110.8 billion) to CNY29.27 trillion (USD4.14 trillion) last month from August, but remained in line with the average in the same period of recent years, Liu said.

After the National Day break, credit bond yields are expected to decline after climbing, and the net value of WM products may follow a “drop-then-rise” trend, Liu added.

Going forward, attention should be paid to the pace at which institutional investors re-enter the bond market, the stability of liquidity, and any changes in the regulatory stance towards bond market volatility, Yin noted.

Editor: Futura Costaglione