Allianz Global Investors is considering buying Chinese sovereign bonds because the government’s efforts to curb excessive lending in the financial sector has pushed up interest rates and bond yields to attractive levels.
David Tan, Asia-Pacific chief investment officer for fixed income, cited the strength of the yuan as another favourable factor.
Unless there is a sharp spike in inflation expectations, the consensus is for the US Federal Reserve to raise interest rates three times this year, with Treasury yields staying below 3 per cent.
China’s 10-year government bond yield is stabilising at about 4 per cent after surging 85 basis points last year. That compares with yield returns on 10-year government bonds of just 2.61 per cent in the US, 0.03 per cent for Germany and 0.08 per cent for Japan.