China’s sovereign bonds gained 1% in the first quarter, the only ones to rise among the 20 largest global debt markets, according to Yahoo! finance. The gains were helped by China’s haven status despite the global bonds index shedding 5.5% in the first three months of the year, the worst in four years.
China’s lack of correlation with overseas bonds helped in creating an alternative for investors to allocate funds amid the debt selloff.
China’s securities made the bulk of the quarterly gain in March, as they rose 0.9%, bouncing back from earlier weakness caused by concern about potential tighter funding conditions.
Analysts say with tighter monetary policy priced in, China’s bonds have become resilient and steady.
Elsewhere, Japan’s bonds handed investors a loss of 0.4%, putting them comfortably in second place after China.
Japan’s bond decline was limited by authorities’ commitment to keeping yields low and stable, as well as the nation’s superior external balance.
China and Japan bonds also had the lowest volatility, with the latter recording the weakest among 44 debt markets.
Despite Japan’s low bond volatility, there are concerns the market is losing its ability to price in investors’ views on future growth and inflation.
Global funds own about 10.6% of China’s government bond market and 7.2% in Japan.
