SINGAPORE: China’s debt is bouncing back after the worst foreign outflows on record, as investors refocus on its growing monetary policy divergence with the rest of the world.

       While the sovereign bonds tumbled when Russia’s war with Ukraine sparked a broad pullback in risk, the securities have pared those losses.

       Money managers are reigniting bets that the People’s Bank of China (PBoC) will ease within days just as the United States raised rates for the first time since 2018 – a split that’s set to boost Chinese bonds and broad developing-nation indexes, in which China can account for more than 50% of securities.

       The prompts behind the turnaround?

       A worsening Covid outbreak that has spurred lockdowns, while investors are also seeking safer assets after a stock rout that only halted when officials promised to ease a regulatory crackdown.

       Meanwhile, US Treasuries – usually the haven of choice to weather uncertainty including war – are getting hammered.

       “We expect China government bonds to outperform global bonds