China 10Y Yield Trades Near 2025 Low

China’s 10-year government bond yield fell to around 1.60%, remaining at its lowest level since February 2025, as the PBOC’s shift toward an overnight-rate-based monetary policy framework signaled potentially lower short-term funding costs. Under the new framework, the central bank will conduct daily overnight reverse repo operations at a fixed rate of 1.25%, moving the overnight rate toward becoming its primary policy anchor and gradually phasing out the long-standing seven-day benchmark. The newly disclosed rate is below the existing seven-day reverse repo rate of 1.4% and broadly in line with market expectations and prevailing funding costs. Meanwhile, the central bank raised the foreign exchange reserve requirement ratio by 2 percentage points to 6% from 4%, effective November 15. The move is intended to tighten dollar liquidity in the onshore market, increasing the cost for financial institutions to hold foreign currency and discouraging commercial lenders from selling dollars.

China’s 10-year government bond yield rose toward 1.66%, although it remained near its lowest level since May 2025, after the People’s Bank of China kept its benchmark lending rates unchanged. The central bank kept the one-year loan prime rate at 3% and the five-year rate at 3.5%, holding both at record lows for a 17th straight month. The decision followed data showing China’s economy grew 4.5% year-over-year in Q3 2026, accelerating from a three-year low in Q2 and beating market forecasts. The rebound keeps Beijing’s full-year growth target of 4.5%–5.0% within reach, giving policymakers more room to delay broad-based monetary easing after introducing fresh targeted support measures. Separately, the PBoC said it would set up a swap facility to provide emergency liquidity support to non-bank financial institutions facing large-scale redemptions. Investors are also monitoring the Communist Party’s Fifth Plenum for policy guidance and further clarity on Beijing’s economic priorities.

China’s 10-year government bond yield rose to around 1.66% on Monday, rebounding from a more than one-year low in the previous session even as key economic data pointed to a recovery in growth momentum. China’s economy expanded 4.5% year-on-year in Q3 2026, accelerating from Q2’s three-year low of 4.3% and above market forecasts of 4.4%. Growth for the first nine months reached 4.6%, keeping the economy on track to meet the government’s full-year target of 4.5%-5%. Meanwhile, industrial output accelerated to 5.5% in September from 5.2% in August, while retail sales picked up to 1.1% from 0.4%. The surveyed urban unemployment rate also edged down to 5.2% from August’s five-month high of 5.3%. Investors will look to remarks from China’s top financial regulators at the Financial Street Forum in Beijing later today for fresh policy signals to support the economy, amid speculation about a potential shift in the policy rate benchmark from the current seven-day rate to an overnight rate.