China 10Y Yield Steady After PMI Data

China’s 10-year government bond yield steadied around 1.81% on Thursday, as investors assessed China’s latest mixed PMI readings. A private survey showed the composite PMI rose to a three-month high of 51.6 in January, as both the manufacturing (50.3 vs 50.1 in December) and services (52.3 vs 52) sectors continued to expand. However, an official survey over the weekend showed an unexpected contraction in both manufacturing (49.3 vs 50.1) and services (49.4 vs 50.2). Meanwhile, demand for local government bonds remained elevated. Banks have been ramping up purchases, supported by record liquidity injections from the People’s Bank of China and softening loan demand. This shift comes as Beijing seeks to cool the recent equity market rally, prompting investors to turn to the relative safety of government bonds. Regulatory changes have also supported buying, with authorities easing interest-rate risk measures earlier this year to align with global standards.

China’s 10-year government bond yield fell to around 1.80% on Friday, approaching its lowest level in over a month, as demand for Chinese debt picked up. Banks have been ramping up purchases, supported by record liquidity injections from the People’s Bank of China and softening loan demand. The shift comes as Beijing seeks to cool the recent equity market rally, prompting investors to turn to the relative safety of government bonds. Regulatory changes have also supported buying, with authorities easing interest-rate risk measures earlier this year to align with global standards. Analysts expect the 10-year yield to trade between 1.7% and 2.1% in 2026, while supply of longer-dated bonds is anticipated to rise. Meanwhile, markets are eyeing upcoming PMI data, with both official and private surveys scheduled for release in the coming days.

China’s 10-year government bond yield fell to around 1.80% on Thursday, as measures to deepen ties with Hong Kong boosted demand for offshore yuan bonds. The central bank plans to increase offshore issuance of yuan-denominated government bonds, expand swap facilities, and introduce yuan government bond futures in Hong Kong. Broader liquidity-management and hedging tools for global investors are also improving overseas access to Chinese bonds, helping contain long-term yields despite ongoing domestic issuance. China has recently issued a new tranche of ultra-long special treasury bonds to support infrastructure and equipment upgrades, putting pressure on prices. Meanwhile, latest data showed China's industrial profits posted its first monthly gain since September and its first annual rise in four years as manufacturing output expanded despite weak domestic demand. Markets now await upcoming PMI figures, with both official and private surveys due this week.