China Sells 50-Year Bonds at Record-Low Yield as Demand Swells

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   The frenzy for Chinese bonds is showing no signs of fading, with the nation’s longest-dated special government notes receiving stronger-than-expected demand at an auction.

   China sold 35 billion yuan ($4.8 billion) of 50-year special government bonds at a yield of 2.53%, according to traders. That compares with an estimate of 2.58% in a Bloomberg survey.

   The debt received more than five times the demand than what was on offer, said the traders who asked not to be identified
   as the information is private.

   This sale is part of China’s 1 trillion yuan special sovereign notes issuance for 2024.
   Investors have been eagerly buying these bonds amid lingering pessimism over the economy, despite warnings from authorities on the risks of a bond bubble, particularly in longer-dated debt.

   China’s consumer prices rose less than expected in May, and factory prices fell for the 20th month in a row,
   fueling calls for more policy action to support growth.
   The People’s Bank of China hasn’t cut interest rates since August, as a wider yield gap with the US would increase the depreciation
   pressure on the yuan. The central bank is set to decide on the rate on its medium-term loans on Monday.

   The optimism isn’t limited to the government debt market, as yields on Chinese corporate bonds are also falling. The yield gap between three-year AAA rated credit bonds and sovereign notes is now near a record low that was set in 2022.”