China 10Y Yield Rises as PBOC Holds Rates

China’s 10-year government bond yield rose toward 1.83% on Friday, rebounding from a one-week low in the previous session as investors weighed the latest monetary policy decision by the central bank. The People's Bank of China held its key lending rates steady for a tenth consecutive month in March 2026, keeping the one-year loan prime rate at 3% and the five-year at 3.5%. This cautious stance reflects rising oil prices amid escalating Middle East tensions, while China’s lower 2026 growth target of 4.5%–5% has reduced the urgency for broad monetary easing. Analysts said higher oil prices may help China exit prolonged deflation, but they also emphasized that without stronger domestic demand or reduced industrial overcapacity, manufacturers may still face rising input costs. Investors are now pricing in a steady or potentially slightly firmer policy trajectory from the central bank in the months ahead.

China’s 10-year government bond yield fell to around 1.81% on Thursday, extending losses from the previous session and hitting a one-week low, as investors recalibrated their expectations for the People’s Bank of China’s next policy move. Beijing's rate markets signaled lower chances of additional policy loosening, as early 2026 data point to a stronger-than-expected economic start, coupled with a modest rebound in consumer prices and slowing factory-gate deflation. Moreover, a sharp spike in global oil prices, fueled by escalating tensions in the Middle East, could constrain the central bank’s ability to ease policy aggressively. Investors are now recalibrating their outlook, with markets increasingly pricing in a steady or slightly firmer policy stance. Investors are now focused on Friday’s benchmark loan prime rate update, with the one-year and five-year rates widely expected to remain steady at 3.0% and 3.5%, respectively.

China’s 10-year government bond yield hovered around 1.82%, moving in a tight range as markets continued to monitor geopolitical and trade developments. Oil prices remained volatile as Iran intensified attacks on energy infrastructure in the Persian Gulf, though optimism over a potential reopening of the Strait of Hormuz supported sentiment. US Treasury Secretary Scott Bessent said Washington is allowing Iran to continue shipping crude through the route, while President Donald Trump seeks broader international support to secure commercial traffic. On the trade front, Trump asked Xi Jinping to delay their summit by about a month to focus on the Iran conflict. Bessent also said any postponement would be due to scheduling considerations rather than pressure on China over the vital shipping route. Meanwhile, China’s solid activity data for January–February showed resilience despite the deepening geopolitical tensions, with industrial output, retail sales, and fixed investment all rising.