CHENGDU, Nov. 30 (NBD) -- China’s bond market has been plunging since late October whereas the yield of 10-year Chinese treasury bonds keeps rising, approaching 2.9% on Nov. 21. An increasingly high expectation of the yield will surpass 3% is prevailing.

Deng Haiqing, the chief global economist with JZ Securities, pointed out on articles published consecutively on Nov. 15^th and 17^th that the yield of national bonds would definitely exceed 3%. Deng believes that instead of last bad out, “deleveraging and lowering duration” due to previous over-optimism about the bond market would in return trigger further market adjustment.

NBD reporter acknowledged that institutional investors are leaning towards equity asset allocation. Surveys from some institution also indicated that 43% investors are more “proactive” about convertible bonds.

Ever since August, both open market and MLF operations reflect “lock up the short-term and unleash the long-term”, a policy urged by PBOC. Besides, PBOC first explicitly mentioned to prevent from risks of “maturity mismatch” of assets and liabilities in its Third-quarter Monetary Policy Report. However, some insider believes, leverage pressure posed by higher debt end cost would not be very intense.

Still, there is no assertion whether bond market will keep declining in a long run.