China treasury bond futures slumped in early trading on Thursday after the U.S. Federal Reserve (Fed) raised rates as expected.
The ten-year treasury bond futures contract dropped 1.99 percent, the biggest loss since its debut, to 94.38 yuan (about 13.6 U.S. dollars). The five-year treasury bond futures contract fell 1.2 percent to 97.56 yuan.
On the interbank market, yields on the treasury bond futures contract for settlement in 2026 surged to 3.36 percent.
Global markets jittered after the Fed raised rates for the first time this year and hinted there would be three increases in 2017, more than investors were positioned for.
Yields on short-term U.S. debt surged to their highest level since 2009, sending the dollar to a near-14-year peak, and Wall Street suffered its biggest percentage decline since before the Nov. 8 U.S. presidential election.
Analysts say domestic factors also led to the high volatility of China's treasury bond futures market. The Chinese economy is stabilizing with rising inflation, and the renminbi, or the yuan, is under increasing depreciation pressure.
The central parity rate of the renminbi weakened 261 basis points to 6.9289 against the U.S. dollar Thursday, according to the China Foreign Exchange Trading System.
The Fed is expected to raise rates again next year, which suggests concern over capital outflow, according to Lian Ping, chief economist with the Bank of Communications.
