China 10Y Yield Trades Near Historic Low

China’s benchmark 10-year government bond yield traded near historical lows at around 1.59%, as robust foreign demand highlighted the economy's heavy reliance on external trade to drive growth. October exports expanded by 35.2% year-over-year to $412.33 billion, lifted by relentless global demand for AI-related technology equipment. Imports registered an even sharper gain, jumping 41.6% to $307.05 billion, marking the strongest rise in more than five years. China's year-to-date trade surplus surpassed $1 trillion for just the second time in history, positioning the nation to exceed last year’s record $1.2 trillion surplus. Still, the divergence between surging exports and subdued consumer spending remains a concern, keeping economic growth disproportionately dependent on external demand. Separately, the latest inflation data also point to persistent upstream cost pressures and subdued domestic demand, as higher input costs have yet to fully feed through to consumers.

China’s 10-year government bond yield fell to around 1.59%, holding at an all-time low as safe-haven demand strengthened amid a sharp equity selloff and a recent shift in monetary policy. Chinese stocks came under renewed pressure as a sharp tech-sector selloff, amid concerns over potential regulations affecting the AI and data center industries, weighed on sentiment. Meanwhile, the PBOC accelerated interest rate reform in early November, setting the overnight policy rate at 1.25%, below the previous seven-day benchmark of 1.4%. On the economic front, China’s annual consumer inflation rate eased to a three-month low of 0.7% in October 2026 from September’s three-month high of 0.9%, slightly below market expectations of 0.8%. Meanwhile, the producer prices rose to a more than four-year high of 5.7% from 5%, exceeding the 5.3% forecast. The latest data highlights persistent upstream cost pressures and weak domestic demand, with higher input costs yet to fully pass through to consumers.

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.