A jump in China’s benchmark 10-year government bond yield risks taking the wind out of the 21-month rebound in equities. Speculation that regulators would curb liquidity in the financial market after the leadership reshuffle at last month’s party congress sent the yield on the treasuries to a three-year high of 3.908 per cent on Monday. The bond market usually reacts quickly to signs of changes in liquidity or monetary policies, and tighter liquidity weighs on the valuations of stocks. The last time when the bond yield rose beyond 3.9 per cent in 2013, Chinese stocks had stuck in the doldrums for a year. China’s stock market has been on a slow recovery from the rout that erased US$5 trillion in market value in 2015, with the Shanghai Composite Index having gained 28 per cent from a low in January last year.
