China 10Y Yield Remains at Over 1-Year Low

China's 10-year government bond yield traded around 1.68% on Monday, remaining at its lowest level in over a year as a raft of disappointing economic data reinforced expectations for additional policy stimulus to bolster growth. Fixed-asset investment shrank 6.7% year-on-year in the first seven months of 2026, worse than the expected 6.2% fall. Industrial output slowed to 4.5% in July from 5.3% in June, missing expectations of 5%, while retail sales rose just 0.6%, below forecasts of 1.5% and down from 1% in the previous month. In addition, the surveyed unemployment rate edged up to 5.2%, its highest level in three months. China's National Bureau of Statistics said the economy has remained "generally stable" this year, though it warned of a "complicated and volatile" external environment and weak domestic demand, prompting investors to expect further stimulus to keep the economy on track to meet this year's growth target.

China’s 10-year government bond yield dropped to around 1.68% on Friday, hitting its lowest level since mid-July 2025, as a fresh liquidity injection by the People's Bank of China boosted demand for government debt. The central bank conducted 349 billion yuan ($51.7 billion) of overnight reverse repos, marking its first mid-month operation of this kind and highlighting the PBOC’s efforts to fine-tune liquidity conditions and ease tax-related funding pressures while reassuring investors that ample liquidity will be maintained through the mid-month period. Additional support also came from the PBOC's recent pledge to deploy policy measures in a timely manner, strengthen countercyclical adjustments, and bolster domestic demand and innovation. Still, the lack of details on any significant monetary easing measures reinforced market expectations that broad-based stimulus remains unlikely in the near term.

China’s 10-year government bond yield traded around 1.70% on Wednesday, hovering near its lowest level since August 2025, as softer inflation data reinforced expectations that Beijing has greater flexibility to provide additional policy support in the remainder of the year. Annual consumer inflation eased to a six-month low of 0.5% in July, reflecting further declines in food prices and slower growth in non-food costs. Producer prices also slowed to 3.5% from 4.1%, marking their first deceleration since turning positive in March following the oil-price surge linked to tensions in the Middle East. Meanwhile, the Political Bureau of the Communist Party of China Central Committee pledged more proactive macroeconomic policies, faster fiscal spending, and continued support for equipment upgrades and consumer goods trade-ins. On the monetary policy front, the PBoC conducted no seven-day reverse repos on Tuesday, its first pause in short-term liquidity injections since June.