China’s bond frenzy fades amid worries on returns
Afizzing five-month rally in Chinese government bonds looks set to end this month, as the haven buying spree comes under threat from expectations of higher debt issuance in the second quarter and a weaker yuan.
The monthly return on Bloomberg’s gauge of the nation’s treasury bonds is essentially zero with just two trading days left in March. Coupon earnings—a gauge of interest income from the debt holdings— have fallen to a 17-year low of 0.2%, while capital gains turned negative for first month in five.
Traders are taking a closer look at their bond positioning after the rally on the back of China’s lackluster economic growth, dovish monetary policy and the impact of cash sloshing round the system with loan demand so weak. Extra stimulus to support the beleaguered property sector may trigger a shift toward riskier assets and Beijing’s plan to issue more government debt could put upward pressure on yields.
Renewed concern about a weak yuan has also spurred speculation the People’s Bank of China might further delay expected interest rate cuts to help stabilize the currency.
“Therate-cutpossibilityislow inthesecondquarterinourview and loose liquidity may normalize as government bond issuance picks up,” said Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group. “That will put some upward pressure on bond yields.”
Even if the impact from a potential supply shock turns out to be moderate, bond returns have become less alluring already. The scramble for fixed-income assets has sent benchmark sovereign yields to two-decadelows,whiletheextra premium investors get from longer-dated or high-grade corporate bonds is evaporating.
Investor views are currently split, according to Larry Hu, head of China Economics at Macquarie Securities Ltd.
“Bears worry that things may have gone too far,” Hu wrote in a recent note. “Bulls, however, point to the lack of credit demand in the real economy, which will trap liquidity in the interbank market and create more demand for bonds.”
Banks, sitting on extra cash that they are not able to lend, often buy bonds to earn a return.
What is a reasonable and customary clause in health insurance? Can an insurer use this clause to reduce the claim? My policy doesn’t impose room rent limits, so I chose a suite at the hospital. However, the insurer deducted a significant portion of the claim, citing a package deal with the hospital for a single room. Is their decision justified? What options do I have to address this issue?
—Name withheld on request
Reasonable and customary charges refer to standard charges, which are common for a particular line of treatment in the geographical area for similar types of hospital. If the clause is applicable in the policy, an insurer can limit the extent of reimbursement to the extent of what they consider as reasonable. The primary objective of this clause is to prevent overcharging by the hospital in connivance with the policyholder.
Considering that medical cases tend to vary substantially, it is extremely difficult to ascertain reasonable charges. So, insurers rarely enforce this clause.
If your policy has no room rent capping, then the insurer cannot force you to opt for a lower category room. The ‘reasonable and customary’ clause cannot be applied to lower the policy benefits. Often, insurers negotiate package rates with hospitals for single and shared room, as those are the most frequently chosen options.
However, that cannot be a reason to deduct claims. You should file a grievance with the insurer to reassess the claim. If they fail to address the grievance, you could write to the regulator and file a case with the insurance ombudsman.
Such deductions and rejections are not common across all insurers. While choosing an insurer, you must look at their number of complaints relative to the size of their business. This will help you ascertain the service quality of the insurers.
Coupon earnings have fallen to a 17-year low, while capital gains turned negative for first month in five
Is it advisable to purchase a critical illness policy if I already have a health insurance policy for ₹50 lakh covering myself and my family?
—Name withheld on request
Critical illness policies and family health insurance, operate differently and serve two different purposes. A