Core Summary:
- China's official Manufacturing Purchasing Managers' Index (PMI) for March returned to expansion territory and hit a one-year high, triggering profit-taking in the bond market.
- Yields on the 10-year and 30-year government bonds rebounded after a significant decline yesterday, with the 30-year active bond rising over 1 basis point.
- Ample liquidity at the end of the quarter supports asset allocation demand, with market focus shifting to second-quarter social financing growth and the impact of Middle East tensions on imported inflation.
On Tuesday, China's bond market showed a slight yield recovery following narrow fluctuations. According to the latest data released by the National Bureau of Statistics (NBS), the official Manufacturing Purchasing Managers' Index (PMI) for March exceeded expectations, indicating active production and demand in factories. Boosted by this macroeconomic data, combined with the pressure to take profits due to excessive yield declines on Monday, both government bond futures and spot prices came under pressure, slightly steepening the yield curve.
As of 11:30 Beijing time, the 10-year government bond active issue 260005 traded at 1.804%, a slight increase of 0.1 basis points (bp) from the previous day's close; the 30-year government bond active issue 2500006 traded at 2.303%, with a rebound magnitude of 1.1 bp. In the government bond futures market, the 30-year main contract TL2606 rose slightly, with a significantly narrower intraday volatility range compared to yesterday.
Traders pointed out that the widespread yield decline on Monday mainly benefited from abnormally loose liquidity at the end of the quarter, with concentrated demand for allocation from funds and commercial banks. However, the PMI index released today returned to expansion territory, and the raw material purchase price index hit its highest point in nearly four years, reflecting the impact of Middle East geopolitical fluctuations on rising energy costs. Although the market currently has limited concerns about domestic inflation pressure, the improvement in the PMI data caused marginal disturbances in sentiment, prompting some institutions to opt for profit-taking at the quarter-end node.
