Due to a sell-off in the debt market that has caused people to sell their fixed-income investments, high-rated onshore corporate bonds are yielding more than they have in over a year.

According to data gathered by Bloomberg, yields on three-year Yuan notes with a AAA rating rose to 3.16% on December 5, the highest level since November 2021. Yields on most domestic corporate bonds with the same rating jumped at least 10 basis points on December 6.  

The withdrawal from local high-grade corporate debt began last month when a selloff in sovereign bonds prompted retail investors to redeem mutual funds and wealth-management products that also contain such notes.

The country’s bond market has been influenced by investors’ changing perceptions of inflation, as Beijing may be drawing to a close its monetary easing program that has driven yields lower this year. In contrast, yields steadily increased in 2022 throughout much of the world as central banks have raised interest rates.

Ting Meng, a senior credit analyst at ANZ Bank China Co., said, “The selloff is mainly due to the easing Covid policy outlook, as investors are seeking higher returns and moving to riskier assets such as equities.”

According to analysts at China Merchants Securities Co., including Yin Ruizhe, in a December 4 report, outflows are still having an influence on the onshore credit market. They added that public funds are seeking to switch to assets with greater liquidity.

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