Chinese Bonds Near Inflection Point as Inflation Path Shifts

Chinese bonds may be reaching an historic turning point, with yields climbing from record low levels as deflationary pressures ease and expectations for monetary loosening recede.

The benchmark 10-year yield has the potential to finally break out of its recent narrow trading range and rise toward 2% or even higher this year from around 1.8% now, some analysts say. Meanwhile, the yield spread between five-year and 30-year notes, a measure of inflation expectations and supply pressure, has reached its widest in about four years and the gap may increase.