'Deleveraging' To Remain Prevalent in Chinese Bond Market in 2017, Experts Say
Yicai Global
/SOURCE : Yicai
'Deleveraging' To Remain Prevalent in Chinese Bond Market in 2017, Experts Say

(Yicai Global) Dec. 29 -- China's bond market has deflated following rising volatility over the past several months. Deleveraging, risk prevention and a tight monetary policy will remain the main themes in 2017, predicted several industry experts interviewed by Yicai Global.

Investors must not be misled into thinking that market volatility is the start of a new bull run, and should remain vigilant against traps in the bond market, said Deng Haiqing, global chief economist at JZ Securities.

"I'm bearish about the mainland bond market, I think the yield on 10-year treasury bonds will be between 3.3 and 3.5 percent," added the fixed-income department head at a major brokerage firm.

Another market insider said inverted year-end yield curves have so far occurred in most wealth management products managed by commercial banks, which will adversely affect the performance of the bond market next year.

As the central bank tightened regulations on commercial banks, the overall size of the interbank wealth management market will shrink in 2017, predicted another institution, and the demand for entrusted investment will decline accordingly. Bond yields will be pushed up due to dwindling money supplies in the bond market.

China's bond market was highly volatile over the last couple of months, and the yield on 10-year treasury bonds rose 60 basis points to 3.3 percent. Market volatility was further fueled by heavy financial leverage.

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