China-US yield gap at widest in 7 months

SHANGHAI: As China's economic expansion accelerates, the local bond market is missing out on a global rally.

The yield on benchmark 10-year government debt rose five basis points to 3.42% as of 5 p.m.Monday in Shanghai after a slew of economic reports beat estimates, even as Treasuries rallied. That pushed the spread between the US and Chinese securities to 121 basis points, the most since September.

China's bond market has been suffering as the world's second-biggest economy shows signs of gaining momentum and as the central bank boosts short-term borrowing costs to curtail financial risks.

While the wider yield advantage should alleviate pressure on the yuan, analysts see little chance of a turnaround for debt investors any time soon.

“With recent economic data exceeding market expectations, there's no surprise the bond market will continue to be under pressure,“ said Zhang Guoyu, a Shanghai-based analyst at Tebon Securities Co.