Market Summary

Yield Movements

The People's Republic of China's (PRC) yield curve for local currency (LCY) bonds shifted upward between 31 August and 30 October. The largest shift in yields was seen in the 3-month tenor, which rose 43 basis points (bps). The 2-year tenor rose 33 bps, while the 1-year tenor rose 22 bps. The 2-year versus 10-year yield spread narrowed from 50 bps to 34 bps between 31 August and 30 October. The PRC's yields rose as its economy continued to grow, following the successful containment of its coronavirus disease outbreak.

Size and Composition

LCY bonds outstanding in the PRC rose 5.4% quarter-on quarter (q-o-q) in Q3 2020, after expanding 5.6% q-o-q in Q2 2020, to reach CNY98.2 trillion (USD14.5 trillion) at the end of September. On a y-o-y basis, LCY bonds outstanding grew 19.9% y-o-y. The PRC's government bond market's growth accelerated in Q3 2020 to 6.6% q-o-q from 5.4% q-o-q in Q2 2020 as the central government continued to fund its fiscal stimulus programs. The PRC's corporate bond market's growth slowed to 3.2% q-o-q in Q3 2020 from 5.9% q-o-q in Q2 2020.

Policy, Institutional and Regulatory Developments

In September, the PRC streamlined the existing regulations for the Renminbi Qualified Foreign Institutional Investor program and the Qualified Foreign Institutional Investor program. The new rules combined the two existing regulations into one and also made application requirements easier and simplified procedures.