China 10Y Yield Retreats

China’s 10-year government bond yield fell to 1.70% on Friday, retreating from a near one-month high in the previous session, as yuan-denominated debt attracts global borrowers seeking cheaper financing. Regulators have cleared the offshore transfer of proceeds from more than 40% of panda bonds issued this year, a record share equivalent to as much as CNY130 billion ($19 billion). Foreign issuers raised CNY115.5 billion through October 8, twice the total for all of last year, and now account for 47% of the market, up from 13% three years ago. Meanwhile, investors monitored China-EU trade talks due to conclude later Friday. European industry groups urged immediate action against unfair Chinese trade practices, warning of mounting pressure on EU manufacturers and further job losses. The talks follow three months of discussions over the bloc’s goods trade deficit with China and Beijing’s restrictions on rare earths and other critical mineral exports.

China’s 10-year government bond yield rose to around 1.70% on Thursday, hitting its highest level in nearly a month as investors returned from the week-long Golden Week holiday. Investors remained underwhelmed by the latest round of stimulus measures, which include mortgage subsidies and expanded central bank funding support, while the State Council pledged to roll out “a package of practical and effective additional policies.” While the latest measures represent the biggest stimulus effort since September 2024 and make it more likely that China will meet its annual growth target of 4.5%-5%, investors are waiting for further support to address the country’s underlying demand weakness. Meanwhile, offshore investors’ monthly repo transactions climbed to 1.2 trillion yuan in August, more than double the level a year earlier. However, broader international participation remains constrained by legal complexities and subdued bond yields.

China’s 10-year government bond yield traded around 1.68%, its lowest since July 2025, as a weaker economy and softer inflation expectations boosted demand for fixed-income assets. August data showed demand continued to deteriorate. Retail sales growth slowed to just 0.4% year-on-year, missing forecasts, while fixed-asset investment contracted 7.2% in the first eight months, a deeper decline than through July, keeping expectations of further stimulus alive. Although industrial output accelerated to 5.2% on tech-manufacturing strength, resilient production alongside weak consumption deepened deflationary concerns. Meanwhile, the PBoC held benchmark lending rates at record lows for a 16th month, even as it plans measures to restrain banks' long-dated bond purchases. The main counterweight is a looming Q4 supply surge: local governments used only 81% of their annual special bond quota in the first 9 months, while unused borrowing quotas from previous years could also be activated.