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Chinese government bond futures have seen a rebound following increased tensions in the Middle East. Nonetheless, analysts caution that over the long term, the bond market could face downward pressure due to higher oil prices and inflation concerns.
Yesterday, the 30-year and 10-year government bond contracts closed higher by 0.55% at CNY112.74 (USD16.37) and 0.13% at CNY108.53, respectively. Meanwhile, the five-year and two-year bonds increased by 0.09% and 0.02% to CNY106.08 and CNY102.464, respectively.
In the near term, heightened risk aversion appears to support the bond market. A fixed income analyst explained that the market performance yesterday, which showed declining yields on most government bonds, reflects stable investor sentiment.
The escalating Middle East situation may dampen global risk appetite temporarily, prompting more investment into safe-haven assets like bonds, which could lead to lower interest rates, according to a chief fixed income analyst.
“Geopolitical conflicts impact bond markets,” noted a securities analyst. “In the short term, they influence risk appetite and asset valuation.”
Looking forward, analysts emphasize the importance of monitoring developments, especially concerning oil prices. Changes here could affect inflation and the Federal Reserve’s monetary policy, potentially limiting domestic easing measures.
One expert predicted that supply shocks in oil could spur global inflation, heightening upward pressure on interest rates.
However, specialists also highlight that China’s bond market tends to be driven predominantly by domestic factors. Therefore, the specific impacts of international developments should be observed carefully.
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