(Bloomberg) -- China’s government bonds declined as the demand for haven assets receded amid the stimulus-fueled stock market frenzy.

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The yield on China’s most actively traded 10-year bond rose two basis points to 2.18% on Tuesday. The rate climbed in the days leading to the Golden Week break when a raft of measures including initiatives to bolster the nation’s ailing property sector fueled runaway gains in stocks.

Chinese stocks continued their ascent on Tuesday with the benchmark CSI 300 Index climbing almost 11% in early trading before paring their advance. The onshore yuan declined as much as 0.7%, the most in almost two months.

The selloff in bonds underscores growing optimism in the Chinese economy as investors plough money into riskier assets. It also marks a swift turnaround in sentiment from last month when yields touched record lows amid doubts over China meeting its growth target of around 5% this year.

The sudden downturn in bonds may raise the risk of redemptions from wealth management products that powered the record rally in sovereign debt for most of this year. That could trigger a negative loop where retail investors rushing to sell their debt products worsens the rout.

“It is most likely mainly reflecting a portfolio rebalancing from bonds to equities as many investors are chasing the equity rally,” said Lynn Song, greater China chief economist at ING Bank NV. He doesn’t expect a vicious cycle of downturns in the bond market and sees focus returning to China’s challenging growth outlook.

Zheng Shanjie, Chairman of the National Development and Reform Commission said in a briefing that China’s economy faces increasing downward pressure.

(Updates with latest NDRC comment in final paragraph.)

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