China’s short-term bond yields — which move inversely to prices — have fallen to levels not seen since the global financial crisis in 2009 amid rising expectations of further rate cuts next year due to weak domestic demand, the Financial Times reports. Ten-year bond yields also fell by 0.03 percentage points to 1.74.

Driving these shifts is a combination of heightened demand for bonds and sluggish consumer activity. Domestic consumption growth has been underwhelming, with retail sales falling short of expectations and imports declining more than predicted last month, the Financial Times reports separately. The decline in yields also comes on the back of increased bond purchases from banks and ins. firms, one analyst told the FT.

The property crisis is also yet to let up: Developers in the country have defaulted on USD 130 bn bonds since the crisis began — including USD 15 bn in defaults this year alone, Bloomberg reports. Just this month, the banking regulator has asked insurers to report their financial exposure to China Vanke Co. to assess how much support China’s fourth-largest developer by sales needs to avoid default.

The Chinese government is pushing back: The People’s Bank of China last week gathered some banks that it says have engaged in “aggressive” trading of sovereign bonds to caution them against illegal trading and advise them to be more “prudent.” The People’s Bank of China also decided to hold its benchmark lending rates steady this month in line with the US Federal Reserve, though it plans to make further cuts next year as part of a shift towards more aggressive support and stimulus in a bid to stimulate the economy, which includes propping up the property market. Authorities have also been slashing purchasing costs and easing restrictions on developers, while also providing state guarantees for bond sales by more stable developers.

It could take a year or two before we see results: While measures have slowed the decline, one analyst estimated that it could take another year or two before the real estate sector bottoms out, with more defaults expected next year.

MARKETS THIS MORNING-

Asian markets are in the green, with Japan’s Nikkei up 1%, South Korea’s Kospi gaining 1.3%, and Hong Kong’s Hang Seng rising 0.7%, boosted by news of a potential merger of Honda, Nissan and Mitsubishi. Meanwhile, Wall Street is heading for a positive open ahead of a holiday-shortened trading week.

EGX30

30,373

-0.5% (YTD: +22.0%)

USD (CBE)

Buy 50.86

Sell 50.99

USD (CIB)

Buy 50.86

Sell 50.96

Interest rates (CBE)

27.25% deposit

28.25% lending

Tadawul

11,849

-0.4% (YTD: -0.7%)

ADX

9,351

+0.8% (YTD: -2.4%)

DFM

5,057

+0.2% (YTD: +24.6%)

S&P 500

5,931

+1.1% (YTD: +24.3%)

FTSE 100

8,085

-0.3% (YTD: +4.5%)

Euro Stoxx 50

4,862

-0.3% (YTD: +7.5%)

Brent crude

USD 72.94

+0.1%

Natural gas (Nymex)

USD 3.75

+4.6%

Gold

USD 2,645

+1.4%

BTC

USD 94,419

-1.7% (YTD: +124.6%)

THE CLOSING BELL-

The EGX30 fell 0.5% at yesterday’s close on turnover of EGP 2.4 bn (42.4% below the 90-day average). Regional investors were the sole net sellers. The index is up 22.0% YTD.

In the green: Ezz Steel (+2.9%), Cleopatra Hospitals (+1.4%), and Elsewedy Electric (+0.9%).

In the red: E-finance (-2.5%), GB Corp (-2.3%), and Emaar Misr (-2.3%).

CORPORATE ACTIONS-

ERC pays off more of its outstanding debt: Qalaa Holdings subsidiary Egyptian Refining Company (ERC) has paid USD 233.6 mn in principal repayment and interest and fees to senior lenders, Qalaa said in an EGX disclosure (pdf). The company’s net senior debt now stands at USD 363 mn, down from an initial amount of USD 2.4 bn.

Remember: ERC is planning to fully repay its outstanding debt before the end of 2025.

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