(Yicai) Oct. 9 -- The Chinese bond market is experiencing a decline because demand for haven assets narrowed as investors turned to the riskier stock market after the government released a stimulus package to support economic growth.

The yield of seven-year Treasury bonds rose 3.75 basis points to 2.1075 percent yesterday, the first trading day after the National Day holiday. That of 10- and 30-year Treasury bonds jumped 3 bps to 2.19 percent and 2.365 percent, respectively.

On Sept. 24, China’s central bank unveiled the country’s biggest economic stimulus package since the Covid-19 pandemic. Since then, 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.

Fluctuations in the bond market may bring about redemption pressure. But according to industry insiders, risks are still controllable.

The bond and stock allocation will quickly balance, said Yin Ruizhe, chief fixed income analyst of State Development and Investment Corporation Securities. In the future, attention should be paid to the entry pace of allocation institutions, the stability of liquidity, and regulators’ response to fluctuations, Yin added.

The redemption pressure is controllable, and if the stock market sentiment cools down in the short term, there will be no large-scale redemption, several wealth management firms told Yicai.

It is unlikely that many redemption activities will take place this month, according to Liu Yu, a fixed income analyst at Huaxi Securities.

October is an intensive month for policy introduction, meaning that the bond market still faces disruption risks, said Jin Yi, a fixed income analyst at Guohai Securities. The yield of 10-year treasury bonds may fluctuate between 2.1 percent and 2.2 percent in the short term, he predicted.

The scale of wealth management declined 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 periods in recent years. After the holiday, the yield of credit bonds and the net value of wealth management products may fall back.

Editor: Futura Costaglione