Chart of the day: HK-China Bond Connect

Market-making banks were keen to stress their commitment to the Bond Connect scheme, which was launched on Monday to allow foreign investors from Hong Kong and other regions to access the US$9 trillion bond market in mainland China without setting up onshore accounts. Interestingly, this column had looked at China bond yields back in mid-June where a small triple top against retracement resistance was expected to put a cap on benchmark 10-year Treasury yields. This has indeed been the case and moving averages have crossed, suggesting the next trend is to lower yields. The trend line, which had provided support, is now acting as resistance, as should the top of the Ichimoku cloud. Watch for the lagging line to break below the 26-day moving average and for yields to drop below the bottom of the cloud.

Nicole Elliott is a technical analyst