China 10Y Yield Stays at 6-Week Low

China’s 10-year government bond yield held below 1.78%, near a six-week low as hopes for a potential Middle East peace deal eased global inflation concerns, while investors remained cautiously optimistic despite China’s stronger economic momentum at the start of the year. The economy grew 0.5% in the first quarter from a year ago, accelerating from the 4.5% gain in the prior quarter and beating forecasts. However, underlying momentum appeared uneven, with industrial output and retail sales slowing, while the jobless rate hit a thirteen-month high. Meanwhile, the US and Iran are considering extending their two-week ceasefire to allow more time for negotiations, even as the Strait of Hormuz remains effectively closed under a dual blockade. Looking ahead, China is set to issue CNY 15.5 billion of government bonds in Hong Kong on April 22, the largest Dim Sum bond tranche since October 2023, a move expected to support offshore yuan liquidity and put downward pressure on yields.

China plans to issue CNY 15.5 billion of sovereign bonds in Hong Kong on April 22, marking its largest offshore renminbi bond sale since October 2023 and exceeding February’s CNY 14 billion offering. The move will increase the supply of yuan-denominated assets to global investors at a time when the currency is seen as a relative haven amid the Iran war. The issuance aligns with earlier signals from policymakers to expand offshore bond supply, improve market liquidity, and strengthen Hong Kong’s role as a key renminbi hub. Although details such as maturities were not disclosed, recent offerings have seen strong demand from both foreign investors and mainland buyers through the Southbound Bond Connect channel, underscoring continued appetite for offshore yuan assets.

China’s 10-year government bond yield held steady at around 1.78%, hovering near a six-week low, reflecting cautious market optimism amid expectations of a modest improvement in the near-term growth outlook despite persistent geopolitical risks. The economy is projected to expand by 4.8% year-on-year in Q1 2026, slightly up from 4.5% in the previous quarter, which marked the slowest pace since the post-pandemic reopening in 2022. The gradual improvement gives policymakers additional room to evaluate external risks, such as the ongoing Middle East conflict, before adjusting monetary or fiscal stimulus. Meanwhile, China’s Ministry of Finance is scheduled to issue CNY 15.5 billion of government bonds in Hong Kong on April 22, marking the largest single tranche of Dim Sum bond issuance since October 2023. The move is in line with broader efforts to expand offshore yuan bond issuance and support liquidity in offshore markets, as previously signaled by People’s Bank of China officials.