China’s Bond Supply Shrinks as Beijing Front-Loads Issuance

China's year-end bond supply is poised for its slackest fourth quarter since 2022, with only 16% of the annual quota remaining. Central and local authorities have approximately 2.2 trillion yuan ($309 billion) left to issue, according to Bloomberg calculations.

The decline follows Beijing's strategy of front-loading bond sales to cushion economic headwinds, including property sector troubles and escalating trade tensions. First-half issuance outpaced levels seen in the past three years, leaving fewer bonds for the remainder of 2024.

Market participants view the supply contraction as a potential stabilizer for skittish fixed-income investors. The 10-year benchmark yield has climbed 23 basis points this quarter to 1.88%, reflecting concerns over proposed tax changes and redemption fee increases.

"The significant supply shrinkage ahead will benefit market sentiment and help curb the ascent in bond yields," said Huachuang Securities analyst Zhou Guannan, who projects the 10-year yield could fall to 1.7% by December.