China 10Y Yield Nears 2025 Low

China’s 10-year government bond yield traded around 1.68% on Tuesday, approaching its lowest level since July 2025 as investors anticipate further policy support following a mixed batch of economic data. Fixed-asset investment fell 7.2% in the January–August period, marking the steepest decline for the period since January–April 2020, while retail sales growth slowed to a three-month low of 0.4% in August. The unemployment rate also edged up to a five-month high of 5.3% from 5.2% in July. On the brighter side, the decline in house prices eased to 3% yoy in August, the softest contraction since December 2025, while industrial output growth accelerated to 5.2% from 4.5% in July. Although China has begun stepping up fiscal support after a prolonged contraction in public spending, mounting signs of economic weakness are keeping pressure on policymakers to roll out additional stimulus.

China’s 10-year government bond yield traded around 1.68% on Monday, nearing its lowest level since mid-June 2025, as banks increasingly turned to government debt to boost returns amid weak demand for mortgages and consumer loans. Claims on the government rose to 16.4% of lenders’ total assets in July from 11.5% five years earlier, while claims on residents fell to 16.4% from 20.3%. The shift marked the first-ever reversal between the two categories, highlighting Beijing’s struggle to revive credit demand following an unprecedented property downturn and a prolonged consumption slump. On the economic front, annual consumer inflation rose to 0.8% in August, matching market expectations and accelerating from a six-month low of 0.5% in July. Producer price inflation also picked up to 3.8% from 3.5%, surpassing expectations of 3.7%. The renewed price pressures were driven largely by higher energy costs amid ongoing tensions in the Middle East.

China’s 10-year government bond yield fell to around 1.67% on Tuesday, nearing its lowest level since mid-July, as robust trade data strengthened expectations that external demand will support economic growth. Exports surged 25.0% year-on-year to USD 401.44 billion in August 2026, accelerating from 23.9% growth in July, while imports jumped 28.2% to USD 282.4 billion, up from 27.5% in the previous month and marking an eighth consecutive month of double-digit growth. The trade surplus widened to USD 119.09 billion in August from USD 101.09 billion a year earlier, matching expectations. The solid trade performance comes as Washington intensifies pressure on Beijing to narrow trade imbalances ahead of a planned Trump-Xi meeting, while trade frictions between Beijing and Brussels are also intensifying ahead of an October deadline to address imbalances that EU leaders increasingly regard as a strategic concern.