China 10Y Yield Nears 3-Week Low

China’s 10-year government bond yield dropped further below 1.8% on Tuesday, approaching a three-week low, as investors continued to seek safer assets amid risks of further escalations in the Middle East conflict. A senior US official indicated that Washington may significantly ramp up strikes on Iran within 24 hours, targeting missile production, drones, and naval assets. Meanwhile, Iran warned that ships attempting to transit the Strait of Hormuz, a key chokepoint for roughly one-fifth of global oil shipments, could be targeted, effectively stalling tanker flows and raising global supply risks. As the world’s largest oil importer, China faces higher energy costs that could weigh on economic growth and stoke domestic inflation. Attention now turns to Beijing’s annual “Two Sessions” from March 4–11, where authorities are expected to set economic targets, outline policy priorities, and release the 15th Five-Year Plan for 2026–2030.

China’s 10-year government bond yield fell to around 1.81% on Monday, easing from a five-week high, as investors sought safe-haven assets amid escalating conflict in the Middle East. The US and Israel carried out coordinated strikes on Iran over the weekend, killing Iran’s Supreme Leader, Ayatollah Ali Khamenei. Iran retaliated against US assets in neighboring countries, rattling global markets and effectively closing the Strait of Hormuz. As the world’s largest crude importer, China faces inflationary and growth pressures from surging oil prices. Beijing urged an immediate ceasefire and advised citizens in the region to evacuate. Markets are also focused on China’s annual Two Sessions from March 4–11, where policymakers will set economic targets and release the 15th Five-Year Plan for 2026–2030. Meanwhile, the PBOC officially cut the FX risk reserve ratio on forward sales from 20% to 0%, effective today, signaling efforts to increase liquidity and stabilize capital flows.

China’s 10-year government bond yield fell to around 1.81% on Friday, retreating from a one-month high reached in the previous session as investors returned from a week-long holiday with caution amid trade policy concerns, while the People's Bank of China kept rates unchanged for the ninth straight month. The PBoC held its one-year and five-year loan prime rates at 3% and 3.5%, respectively, indicating that authorities are in no rush to implement broad monetary easing after recent sector-targeted cuts. The decision also reflects a careful balance between supporting growth and maintaining financial stability. Meanwhile, US President Donald Trump announced plans to raise a temporary 10% tariff on imports to 15% in response to a ruling by the Supreme Court. He further warned that countries backing away from recent trade deals could face even higher duties. Still, sentiment was aided by expectations that Trump’s new tax policies could boost Chinese exports.