Managers to reshuffle RMB bond portfolios after yields sink

06 June 2014   Category: News, Asia, China, Global   By Derek Au

Fund managers in charge of RMB bond funds will reshuffle their portfolios after seven-year Chinese government debt was sold at its lowest yield in ten months, according to a senior executive at a Mainland firm.

Bloomberg reported that the Ministry of Finance auctioned 28 billion RMB (US$4.5 billion) at a yield of 3.87%, the lowest level for similar-maturity notes since August, after Chinese authorities signalled monetary easing to support the economy. Seven-year yields continued to drop 4.5 basis points to 3.94% on Wednesday (June 4) on the secondary market, according to ChinaBond data.

Victor Lau, sales director, product and marketing, Da Cheng International Asset Management, told Asia Asset Management that volatility in the bond market would affect the price and net asset value of RMB bond funds. He claimed that fund managers would adjust their portfolios accordingly to secure targeted returns.

“Bond funds won’t only invest in one type of bonds. There is a lot of variety. The portfolios include money market funds, government debts and corporate debts which are further separated into different ratings. Different ratings lead to different yields. Will the portfolios be adjusted? Surely they will,” Mr. Lau said. 

China’s State Council is seeking to cut the reserve requirement ratio of banks which have offered over a certain amount of loans to rural borrowers and small and micro businesses, according to a statement issued last Friday, following a meeting chaired by Premier Li Keqiang.